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MOSL: Morning India (13/November/18): 1. Coal India; 2. Britannia Industries; 3. Eicher Motors; 4. Shree Cement; 5. Aurobindo Pharma; 6. Oil India; 7. Bank of India; 8. Nalco; 9. KNR construction

MOrning India (13/November/18): 1. Coal India; 2. Britannia Industries; 3. Eicher Motors; 4. Shree Cement; 5. Aurobindo Pharma; 6. Oil India; 7. Bank of India; 8. Nalco; 9. KNR construction

 

Today’s top research idea

Coal India: Power sector dragging FSA realization but boosting e-auction prices; strong earnings growth

• Coal India’s 2QFY19 revenue grew 22% YoY to ~INR222b. Adj. EBITDA (ex-OBR) increased 266% YoY to ~INR47b. Adj. PAT increased 737% YoY to INR30.8b, lower than our estimate due to higher OBR provision, marginal revenue miss and higher cost of stock adjustment, partly offset by higher other income. High e-auction prices are compensating for the loss of volumes to the less-remunerative power sector.
• We expect PAT CAGR (FY18-20) of ~27%, led by the full benefit of price hikes and evacuation charges, higher volumes, and operating leverage. The stock trades attractively at 5x FY20E EV/adj. EBITDA. We value the stock on 6.5x FY20E EV/EBITDA at INR358/share. Maintain Buy.

Piping hot news

Retail inflation eases to 3.31% in leeway to RBI to hold rates

• The Reserve Bank of India (RBI) is likely to keep interest rates unchanged in its bimonthly monetary policy review on 5 December, with retail inflation unexpectedly easing to a 13-month low in October, driven by lower food prices. Data released by the statistics department showed that the consumer price index (CPI)-based inflation rate slowed to 3.31% in October from 3.7% a month ago, on the back of lower prices of pulses, vegetables and sugar, while factory output—measured by the index of industrial production (IIP)—decelerated to 4.5% in September from a revised 4.7% in the previous month as manufacturing growth eased.