Buy Coal India; target of Rs 359: Emkay Global
Emkay Global’s report on Coal India
Coal India (CIL) has changed its pricing policy and has rationaliz ed prices across grades , resulting in an average price hike of c. 9%. This is expected to increase revenue by Rs64bn annually (Rs19.5bn for remaining part of FY18). This move will fully offset the adverse impact of wage revision. However, post the price hike, Coal prices (ex – inland transportation cost) are still 50 – 60% cheaper compared to imports. Also, e – auction prices are likely to improve. Most of the concerns like : grade slippage, e – auction price decline, lower volume growth and wage hikes have abated. We expect business performance to improve with a pick – up in power demand.
Dividend yield at 6 – 7% is attractive. We expect dispatches to grow by 5% in FY19, e – auctio n price to improve and FSA to remain stable. Accordingly, we upgrade our recommendation to BUY with a revised TP of Rs359 .
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