Sharekhan has given Buy recommendation for Coal India with a target price of Rs. 185 in its research report issued on Aug 11, 2021

Sharekhan’s research report on Coal India

Operating profit met expectations at Rs. 4,844 crore (up 58.7% y-o-y); but PAT of Rs. 3,170 crore (up 52.4% y-o-y) missed our estimates due to lower other income and higher depreciation. Coal offtake stood at 160 mt (up 33% y-o-y), while blended realisation stood at Rs. 1452/tonne (up 2.8% y-o-y). E-auction/FSA sales volume grew by 90%/25% y-o-y to 30 mt/127 mt but e-auction realisations declined by 10.4% q-o-q to Rs. 1,569/tonne while FSA realisations remained flat q-o-q at Rs. 1,394/tonne. Coal offtake remains robust with 28.4% y-o-y growth during April-July, while strong demand from power and elevated international coal price could result in improvement in e-auction prices. Potential efficient capital allocation for non-core investments (aluminium smelting and solar energy) could be key catalysts.

Outlook

Stock trades at an attractive valuation of 4.7x its FY2023E EPS (close to trough valuation) and offers a high dividend yield of 12%. Hence, we maintain a Buy on the stock with an unchanged PT of Rs. 185.

 

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