“BUY” This Large Cap Maharatna Stock With A Target Price of Rs. 210: Edelweiss Securities

Edelweiss Securities Limited, a renowned Indian brokerage firm, has placed a buy call on Coal India Limited's shares with a target price of Rs. 210. According to the brokerage, the stock may reach its target price within a year from its current market price of Rs. 156. The state-owned coal mining company Coal India Limited (CIL) is the world's largest coal manufacturer. Coal India Ltd is a Maharatna company and has seven manufacturing joint ventures which are Eastern Coalfields Limited (ECL), Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Western Coalfields Limited (WCL), South Eastern Coalfields Limited (SECL), Northern Coalfields Limited (NCL), and Mahanadi Coalfields Limited (MCL) and Central Mine Planning & Design Institute (CMPDI).

The brokerage’s take on Coal India Ltd.

Edelweiss Securities in its research report has said that "CIL's Nov-21 production/offtake rose 4.3%/10.3% YoY. Key points: i) Production rate at 1.79mt/day is the highest ever for the month of November. ii) Demand remained buoyant with the offtake rate at 1.89/day-significantly higher than in the past. iii) Pithead inventory reduced further to merely 29mt (Mar-21-end: 97mt) as demand outpaced production. iv) SECL/WCL showed a significant performance uptick while MCL continued to be the best-performing subsidiary. In our view, CIL's performance is likely to get a leg-up from the most profitable and productive subsidiaries - MCL, SECL and NCL - ramping up production. As a result, we expect our FY22E offtake of 643mt (up 12% YoY) to be met."

The brokerage has claimed that "We expect CIL's cash accretion to continue mainly due to higher sales volume and e-auction prices. On the working capital front, inventory continues to decline and receivables remain under check. Hence, we expect cash accretion to sustain in H2FY22. We believe that our FY22 divided estimate of INR18/share (dividend yield: 11.3%) is likely to be met, particularly in light of the first interim dividend of INR9/share."

Buy Coal India Ltd. with a target price of Rs. 210

According to the brokerage's research report "Despite a rather lackluster H1FY22 performance, we expect FY22 to be salubrious for CIL mainly due to volume growth and higher e-auction prices. On the working capital front, we already see a significant respite as both receivables and inventory has declined. We believe that significant cash balance/accretion would be utilised towards the payment of dividends. We believe that the ensuing wage hike is likely to be offset by price increase of regulated coal, and be EBITDA-neutral in the worst case."

The brokerage has further claimed that "We maintain 'BUY/SO' on CIL with an unchanged TP of INR210 on 9x FY23E EPS. Our recommendation is also driven by a potential dividend yield of 11-13% over the next two years."

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Securities Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.