Comments
Emkay Global
Coal India (Buy)
CMP: ₹307.9
Target: ₹359
Coal India (CIL) has changed its pricing policy and has rationalised prices across grades, resulting in an average price hike of 9 per cent. This is expected to increase revenue by ₹6,400 crore annually (₹1,950 crore 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 per cent cheaper compared to imports. Also, e-auction prices are likely to improve.
Most of the concerns such as 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 per cent is attractive. We expect dispatches to grow by 5 per cent in FY19, e-auction price to improve and FSA to remain stable. Accordingly, we upgrade our recommendation to ‘buy’ with a revised target price of of ₹359.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.