Coal India Limited - Pricing pressure continues - 1QFY14 Results Review - Antique

Coal India has reported disappointing profits in 1QFY14, down 16.5% YoY due lower than expected offtake and lower e-auction prices. Hence, we have revised our FY14/15 EPS downwards by 7.8% and 7.3% respectively and lowered our target price to INR356 from INR387 on account of margin contraction and bleak outlook on international coal prices leading to lower e-aution prices.

We expect EBITDA margins to remain range-bound between 24-27%. We believe the stock will remain under pressure as Govt of India is planning to disinvest 5% stake in the company. However, as the company continues to earn RoE of 27% in FY15 we maintain a BUY rating on the stock.

Valuation and outlook

At the CMP of INR263, CIL is trading at 8.2x PE and 3.3x EV/EBITDA on FY15e basis. We assign a 6x EV/EBITDA multiple and lower our target price at INR356. Reiterate BUY.

Source : Equity Bulls

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