Buy Coal India; target of Rs 351

Coal India's (CIL) Q1FY17 EBITDA, at INR 42.5bn, came 11% below consensus mainly due to decline FSA realisation due to low off-take of higher grade coal in Q1FY17 before price rationalization towards end of May. 

 

On positive side, cost of operations (excluding OBR expense) has come down 3% YoY to INR 1,016/t. The biggest concern for us is the tepid demand scenario from power units that is likely to keep volume growth muted. Consequently, we have trimmed our volume estimates for FY17/18E by 1%/2%. Consequently, our PAT estimates for FY17/18 are lowered by 5%/4%. We maintain ‘BUY’ with target price of INR 351 (INR 367 earlier), based on 16x FY18E PE.

 

 

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