We revise our rating on Coal India to ADD (BUY previously) as the recent stock rally prices in a normalised growth trajectory, though accelerated volume growth through a combination of policy efforts and on the ground traction could help raise the earnings profile.
At 4% dividend yield and 9X P/E CIL is not outside our comfort zone, though will look for step-up in revenue growth as a catalyst for stock performance. Revise TP to R392 (R335 previously).
Absence of revenue growth due to lack of incremental volumes as well as flat realizations led to 17% yoy decline in EBITDA for CIL, which reported revenues of R200 bn (0% yoy, 18% qoq), EBITDA of R51 bn (-17% yoy, 24% qoq) and net income of R44 bn (-18% yoy, 13% qoq) against our estimates of R199 bn, R56 bn and R45 bn.
EBITDA was impacted by R9 bn of provisions that appear to be non-recurring in nature. Employee cost was maintained at R70 bn for the quarter (6% yoy decline), while sustenance of realizations suggests that incentives for supplying contracted quantities have been sustained.
– Kotak Institutional Equities
