Buy Coal India; target of Rs 600: Motilal Oswal

Motilal Oswal's research report on Coal India

Coal India (COAL) reported a production of 46.1mt in Aug’24, down 12% YoY. Accordingly, during Apr-Aug’24, total production reached 290mt (+3% YoY) and dispatches stood at 308mt (+1% YoY). The sluggishness in volume growth recently is primarily driven by the erratic monsoon (especially in key coal-producing states - Odisha, Jharkhand, and West Bengal) as compared to muted rainfall during last year. Out of total dispatches during Apr-Aug’24, COAL supplied ~81% to the thermal power industry. COAL targets to clock a production of 838mt in FY25, aided by rising demand from the power sector (~80% share) with dispatches under e-auction at ~15% of total volumes. In FY24, COAL achieved 100% of its yearly production target. Subsidiaries (BCCL, CCL, NCL, WCL, and MCL) exceeded their targets. Production at SECL and ECL was confined to 98% and 93% respectively, due to a sluggish start in FY24.

Outlook

We maintain our revenue/EBITDA estimates for FY25/FY26. The stock is trading at 4.7x FY26E EV/EBTIDA. We reiterate our BUY rating with a TP of INR600/share, valuing the stock at 6x FY26E EV/EBITDA.

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