Buy Coal India; target of Rs 295: Edelweiss

Edelweiss' research report onCoal India

Coal India's (CIL) Q4FY17 EBITDA, at INR 33.8bn, came 32% below consensus due to INR 8bn grade slippage provision and INR 7bn employee cost, though revenue came broadly in line. We estimate wage cost to grow 18% over FY16 (earlier estimate 14%) and slightly lower FSA realisation due to grade rationalisation.

Outlook

We expect CIL’s EPS to remain under pressure due to higher wages, though the impact will be partially mitigated by higher volumes. We estimate 7.5% dividend yield over the next 2 years as a key positive. We maintain ‘BUY/SO’ at revised TP of INR 295 (earlier INR 340), implying an exit P/E of 14.1x FY19E.

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