Prabhudas Lilladher recommended accumulate rating on Coal India with a target price of Rs 235 in its research report dated August 14, 2019.
Prabhudas Lilladher's research report on Coal India
Coal India (COAL) reported Q1FY20 earnings below our estimates by 3% due to higher than expected costs, diluting better than expected FSA realisations. We note that company continued to disappoint on volumes (despite tapering base) with deteriorating visibility on the state of operations. Sales volume in last four months fell by 2% YoY. The performance stands unjustified in light of two major rail lines (loading incremental 20mtpa or 3.5% growth over FY19 base) commissioned in Odisha and Jharkhand during later part of FY19. Contractor related issues, lack of last mile connectivity at recently commissioned railway lines and depletion of reserves at logistically better-connected old mines would continue to restrict COAL's volume in the range of 4-5%.
Stock has fallen sharply due to unabated stock supply by Govt of India and weak operational performance. This has made stock attractive on valuations with EV/EBITDA of 3.0x and P/E of 6.3x FY20E. Hence, we upgrade the stock to Accumulate with TP of Rs235.
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