Coal In­dia (Buy)

The Hindu Business Line - - STOCKS -

CMP: ₹278.75

Tar­get: ₹365

Coal In­dia is a pub­lic sec­tor hold­ing com­pany. Coal In­dia is a coal min­ing com­pany, which is en­gaged in the pro­duc­tion and sale of coal.

We re­it­er­ate ‘Buy’ on Coal In­dia (CIL) with re­vised tar­get price of ₹365 as we ex­pect re-rat­ing with mar­ket fi­nally ap­pre­ci­at­ing the struc­tural im­prove­ments such as im­proved coal qual­ity, bet­ter evac­u­a­tion, sig­nif­i­cant in­crease in auc­tion linked vol­umes and sharp re­duc­tion in work­ing cap­i­tal which pro­vide strong earn­ings/cash flow vis­i­bil­ity.

We also ex­pect strong up­side to e-auc­tion re­al­i­sa­tions given the strong global coal prices, weak ru­pee and strong un­der­ly­ing de­mand (from both power and non-power) which is ex­pected to mit­i­gate the head­wind of higher diesel prices. Con­cerns around di­vest­ment cap­ping stock re­turns in near term are over­done as CIL trades at in­ex­pen­sive val­u­a­tions of 5.4x FY19E EV/EBITDA de­spite at­trac­tive re­turn ra­tios and ro­bust div­i­dend yield.

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