Buy Coal India;target of Rs 394: SPA Research

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26 Aug, 2025 12:21

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SPA Research's research report on Coal India Coal India's Q3FY16 results came inline with estimates with topline growing by 7.0% YoY to INR 196 bn whereas bottomline clocked growth of 12.9% to INR 37 bn. While the coal production grew by 9.3% YoY to 144 mn tons, coal off-take grew by 10.7% to 138 mn tonnes. Other income declined 15.5% INR 15 bn. CIL will have to invest ~INR 600 bn by 2020 to reach its 910 mn ton p.a. coal production target. This might reduce other income in the near term but the company will generate much more return on the invested amount (~23-25% EBITDA and improvement in return ratios). We retain our Buy recommendation on the stock with a target price of INR 394 based on 15x FY17E earnings. GoI's target of 910 mn tonne coal production from Coal India by 2020 is achievable only if required evacuation infrastructure is set up. Coal India, in coordination with the Central & State governments, is successfully resolving key issues in coal production which can be seen from 6.9% & 9.0% growth in coal production in FY15 & YTD respectively (Avg. 1.8% CAGR between FY11-14). While these measures will result in topline growth, CIL must keep its cost in check to maintain profitability. Now with government allowing state PSUs to commercially mine coal, allowing private players for the same is not a far cry. This might erode Coal India's profit significantly unless it becomes more efficient, adopt modern mining techniques and increases outsourcing. We expect FY17 Coal production & Offtake of 577 mn tonnes (8.0% CAGR FY15-17E) and 598 mn tonnes (10.7% CAGR) respectively. Topline & bottomline is expected to grow at a CAGR of 7.8% & 9.9% between FY15-17E. We retain our Buy recommendation on the stock with a target price of INR 394 based on 15x FY17E earnings. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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