Sharekhan has given Buy recommendation for Coal India with a target price of Rs. 280 in its research report issued on Sep 08, 2022
Sharekhan’s research report on Coal India
E-auction premium remains high at 290% of notified coal prices. We expect it to remain firm in FY23 given limited supply for e-auctions, high international coal prices and single e-auction window (to remove coal price disparity). CIL’s coal production and offtake remain strong, rising by 21%/9% y-o-y to 253 mt/283 mt during April-August 2022 led by 18.6% y-o-y rise in supplies to power sector to 243 mt. We increase our FY23-24 earnings estimate to factor higher coal offtake and e-auction premium. CIL is focused on rationalising costs and aim to reduce manpower by 5% annually in the next 5-10 years, close unviable underground mines (13 mines already closed) and improve infrastructure for coal evacuation (building rail lines and mechanized coal transportation and loading system).
Outlook
We maintain a Buy on Coal India with increased PT of Rs. 280 (reflects upwards revision in FY24E EPS). CIL trades at an attractive valuation of 4.8x its FY24E EPS (close to trough valuation) and offers a high dividend yield of 12-13%.