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Buy Coal India, target Rs 302: Yes Securities

"Valuations appear attractive at 5.2 times FY21 EV/Ebidta," the brokerage said.

May 31, 2019, 01.40 PM IST
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The brokerage has set a one-year horizon for the stock to hit the target price.
Yes Securities has given a buy recommendation on Coal India with a target price of Rs 302.

Shares of Coal India traded at Rs 254.95 around 1:10 pm on 31 May, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

Coal India reported strong earnings growth led by improvement in FSA realisations and increase in year end incentives. Revenue of Rs 28,500 crore was quite higher than street estimate of Rs 27,500 crore, the brokerage said.

FSA realisation during the quarter increased 6.8 per cent QoQ to Rs 1,425 per tonne against an expectation of marginal increase.

E-auction prices declined 3.3 per cent QoQ led by improvement in domestic coal availability and a decline in global coal prices.

Production and sales volume during the quarter were higher by 6 per cent and 2.9 per cent YoY, respectively. Ebidta per tonne stood at Rs 502 per tonne, higher by 15.3 per cent QoQ and was also above street estimates.

Costs per ton was increased by 6.1 per cent QOQ to Rs 1,244 per tonne largely due to an increase in employee costs and overburden removal charges.

Volumes growth picked up in Q4 FY19 led by improvement in rake availability and the government’s focus on improving power plant inventory.

As per the brokerage, with inventory levels at power plants improving, sales to non-power producers and e-auction improved in Q4 and is expected to improve further in Q1.

"Valuations appear attractive at 5.2 times FY21 EV/Ebidta. Recommend Buy with target price of Rs 302. E-auction volumes during the quarter remained weak YoY as the company has been mandated to give preference to power producers over non-power players," said the brokerage.

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