Coal India (Buy)
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.