Hold Coal India; target of Rs 250: Prabhudas Lilladher

Prabhudas Lilladher's research report on Coal India

Coal India (COAL) reported Q3FY19 earnings marginally above our estimates on the back of better than expected FSA realisations. We note that company changed accounting for provisions related to quality variance by adjusting from revenue against earlier practice of providing as cost. Accordingly, revenues for H1FY19 were revised lower by Rs5bn to account for grade slippage. Against the same, company recognized credit of Rs24mn in the quarter. Hence, we keep our estimates unchanged for FY20e and FY21e as volatile grade and lower E-auction volumes would offset higher pre-grade adjustment realisations.

Outlook

Given the weak outlook on volumes and deteriorating B/S (resulting in dividend cuts), we reiterate Hold with TP of Rs250, P/E of 10x FY20E.

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