Analysts Repose Faith In Coal India After Q3 Results, Expect Better Q4
Brokerages expect Coal India to announce dividends in the coming weeks due to underlying cheap valuations.
Most analysts retained their outlook and target prices on Coal India Ltd. on hopes of better performance in the fourth quarter of the current fiscal.
That comes as the world’s largest coal miner’s third-quarter profit fell on the back of lower realisations from online auctions and higher operating expenses. But brokerages expect Coal India to announce dividends in the coming weeks due to underlying cheap valuations.
Coal India Q3 Results: Key Highlights (YoY)
- Revenue fell 7.4 percent to Rs 23,190.5 crore
- Net profit fell 14.1 percent to Rs 3,923.9 crore
- Ebitda fell 26.8 percent to Rs 4,968.5 crore
- Margin stood at 21.4 percent versus 27.1 percent
Shares of the company extended gains for the second consecutive trading session. The stock rose as much as 2.3 percent to Rs 183.40. compared with 0.6 percent gain in the NSE Nifty 50 Index.
Here’s what brokerages made of Coal India’s Q3 results:
Edelweiss Securities
- Maintain ‘Buy’ rating; with Target Price of Rs 250 per share.
- E-auction premium jumped to a three-quarter high of 86 percent, but volume slid to its lowest-ever.
- FSA realisation inched down owing to the grade mix.
- Going forward expect higher e-auction premiums and volume pick-up.
- See higher potential of a greater dividend payout in FY20.
- The stock is trading at an undemanding 5.9x FY21E EPS.
JP Morgan
- Maintains ‘Overweight’ rating; TP of Rs 275 per share.
- Operational environment has improved after a very weak second and third quarter.
- Expect dividend to be announced in the coming weeks.
- Coal India’s valuation at 6x P/E is excessively cheap.
Prabhudas Lilladher
- Maintain ‘Accumulate’ rating; TP of Rs 225.
- Weakness in FY21 e-auction realisations to be offset by strong availability due to higher production.
- Continuous stake sale drags valuations to all-time low.
- Valuations fell to all-time low with EV/Ebitda of 2.5x, pushing dividend yield to near highs of 9 percent.
Jefferies
- Maintain ‘Buy’ rating; TP cut to Rs 255 from Rs 265.
- Rising non-power mix has supported stronger FSA Average selling price.
- E-auction prices should moderate from third-quarter levels.
- Frequent government stake sale remains a key overhang.
- See value in at 3x FY20E Ebitda ex-OBR plus solid dividend yield potential.