February 22, 2017 / 13:10 IST
FSA volumes were lower by 3% YoY at 113 MT led by weak demand but the key disappointment was FSA realisations increasing merely 0.9% YoY to Rs 1289/t. FSA realisations have thus far failed to reflect the benefit of the price hikes taken in May’16 and this could be on account of inferior product mix and grade slippages in our view.
Outlook
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We retain Buy on Coal India (CIL) and revise our TP to Rs 355 (vs Rs 340 earlier) as we expect CIL to benefit from i) better demand going ahead, ii) the expected improvement in FSA pricing led by better offtake of medium to higher grade coal (on improved import parity) & higher coking coal prices, and iii) increasing eauction realisations. We expect the above to fully nullify the impact of upcoming wage hikes.
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