Hold Coal India; target of Rs 132: Prabhudas Lilladher

Prabhudas Lilladher's research report on Coal India

Coal India (COAL) reported Q2FY21 earnings in line with our estimates. However, adjusted for OBR write back, earnings missed our expectation by 21% due to higher contractual expenses. Street is enthused by 25%+ volume growth posted by COAL in past couple of months. However, that is largely led by equally weak base. We expect growth to taper off to 7% November onwards due to improved base. In spite of attractive on valuations (EV/EBITDA at 2.5x FY22e), stock would continue to underperform due to frequent stake sale by Govt. Admittedly, Govt may not look to sell stake at current levels.

Outlook

However, upside would be restricted as Govt may look to sell at Rs136-140, the price at stake sold in last ETF. In light of overhang on continuous stake sale and weak outlook on E-auction segment, we maintain Hold rating with TP of Rs132.