Buy Coal India, target Rs 235: Edelweiss Securities

Coal India reported a 10% YoY decline each in August production and sales volume, now down to their lowest levels in the past three years.

By ETMarkets.com | Updated: Sep 04, 2019, 12.38 PM IST

Edelweiss Securities has a ‘buy’ rating on Coal India with a price target of Rs 235.

Coal India reported a 10% YoY decline each in August production and sales volume, now down to their lowest levels in the past three years.

Key highlights:

·Larger subsidiaries MCL and SECL accounted for the bulk of the decline.

·Continued low rake availability – down to 178/day in August from 205/day in July – dampened offtake.

·Production volume was hit by fatalities at MCL and SECL and higher-than-normal rainfall.

That said, we expect an uptick in production/offtake Q3 onwards as:

·weather-related issues subside;

·rake availability improves; and

·production normalises at MCL and SECL.

“Hence, we do not believe our FY20E volume growth of 4.6% is at risk, but note that CIL’s target of 8.5% is daunting. That said, a healthy dividend yield and free cash flow are positives. We maintain a ‘buy’ rating on the stock with a target price of Rs 235 (8.6 times FY21E EPS),” the brokerage said.

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