Motilal Oswal is bullish on Coal India has recommended buy rating on the stock with a target price of Rs 307 in its research report dated May 31, 2019.
Motilal Oswal's research report on Coal India
Revenue grew 6% YoY to ~INR285b (our estimate: INR283b) in 4QFY19, led by an increase of (a) ~4% YoY in FSA realization (INR1,460/t v/s our estimate of INR1,388), (b) 30% in e-auction realization (INR2,754/t v/s our estimate of INR2,619) and (c) ~2% in volumes (163.1mt; volume mix was weak). FSA realization was supported by better grade management and mine mix. Cash cost (ex-OBR) increased 5% YoY to INR1,110/t due to a higher wage bill (includes INR6.5b for prior- period pension provision and INR3-4b for bonus provisions). Excluding the wage bill, cash cost was down ~4% YoY.
The stock trades attractively at ~4x FY20E EV/adj. EBITDA (v/s historical average of 7x), P/E of ~8x (v/s average of ~14x) and offers a dividend yield of ~7-8%. We value the stock on 5x FY20E EV/EBITDA at INR307. Maintain Buy.
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