Coal India Ltd - Ventura

With the recent PMO directive set to resolve power sector woes, we expect CIL to increase its production at CAGR of 7.3%, leading to 11.7% growth in revenues to Rs.77,923.3 crore over the forecast period. In our view, current headwinds like impending FSAs and pricepooling of imported coal are nearing consensus and likely to have no negative impact on the earnings of the stock.

At the CMP of Rs.358, Coal India is trading at 8.8x and 7.9x its EV/EBITDA estimates for FY13 and FY14 respectively. The current valuations undermine the immense reserve potential of Coal India and its ability to ramp up production from its existing and new mines. We have valued CIL, at 9.0x its estimated EBITDA for FY14, and recommend a BUY with a Price Objective of Rs.442, representing a potential upside of 23.5% over a the period of 12-18 months.

Source : Equity Bulls

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