Motilal Oswal - Coal India Ltd. (COALINDIA) MOSL: COAL INDIA: e-auction recovery in sight, premiums to stay

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Motilal Oswal

Vishal Chandak

EUR 120.00 For Business Accounts Only

MOSL: COAL INDIA: e-auction recovery in sight, premiums to stay

COAL INDIA: e-auction recovery in sight, premiums to stay

(COAL IN, Mkt Cap USD13.1b, CMP INR159, TP INR200, 26% Upside, Buy)

COAL's 2QFY22 e-auction premiums have been disappointing. However, the management highlighted that the current premium is over 50% compared to the 15.3% reported in its 2QFY22 result. It has re-started e-auction to non-regulated sectors, which should result in improved profitability.
The management expects the price hike to offset an increase in wages, given the current strong demand environment and high international coal prices.
The stock trades at 3.4x/3x FY22E/FY23E EV/EBITDA, with an attractive dividend yield of 11%. We value the stock at 4x FY23E EV/EBITDA with a TP of INR200. We maintain our Buy rating, with a revised TP of INR200/share (from INR185 earlier). A surge in coal demand from the Power sector, which could squeeze supplies to non-regulated sectors through e-auctions, remains a key risk as it could hurt profitability.

26/11/2021 8 EN

Underlying

Coal India Ltd.

Coal India is engaged in the identification, exploration, and production of coal in India. Co. offers coking coal primarily for use in steel making and metallurgical industries, and for hard coke manufacturing; semi coking coal for use as blend-able coal in steel making, merchant coke manufacturing, and other metallurgical industries; NLW coking coal for use in power utilities and non-core sector consumers; non-coking coal for use as thermal grade coal for power generation, as well as for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other heating applications.

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INE522F01014 National Stock Exchange of India India

Provider

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Vishal Chandak

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MOSL: COAL INDIA: e-auction recovery in sight, premiums to stay

MOSL: COAL INDIA: The black diamond: Once shunned, now sought after

COAL INDIA sees an upgrade to Slightly Positive due to a better fundamental star rating

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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