Buy Coal India: target of Rs 185: Sharekhan

Sharekhan is bullish on Coal India has recommended buy rating on the stock with a target price of Rs 185 in its research report dated September 13, 2021.

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Sharekhan’s research report on Coal India

Coal India is seeking government nod to hike coal prices by 10-11% under a long-term contract for power companies. For every Rs. 50/tonne price hike, Coal India’s PAT would rise by 10%. Rising e-auction premium (46% in Aug’21) and higher coal offtake (up 24% y-o-y during April-August) would help PAT clock an 18% CAGR over FY21-24E with potential for earnings upgrade on likely rise in coal realisations. Management aims to lower receivables by ~40% to Rs. 12,000 crore by Mar’22. This coupled with a rise in earnings would improve cash to ~Rs. 26,000 crore in FY22 and help sustain high dividend payment ratio at ~65%.

Outlook

Improving earnings growth outlook, high RoE of ~45% and dividend yield of ~12% makes valuation attractive at 5.1x FY23E EPS (close to trough level and ~30% discount to Asian peers). Hence, we maintain a Buy on Coal India with an unchanged PT of Rs. 185.

For all recommendations report, click here

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