MOSL: Morning India (21/February/19)-1. Coal India (Coal demand to rise 3x even after tapping RE potential); 2. Financials (Government announces capital infusion of INR482b in PSBs); 3. Vodafone Idea; 4. GE T&D
MOrning India (21/February/19): 1. Coal India (Coal demand to rise 3x even after tapping RE potential); 2. Financials (Government announces capital infusion of INR482b in PSBs); 3. Vodafone Idea; 4. GE T&D India
Today’s top research idea
Coal India: Coal demand to rise 3x even after tapping RE potential; Valuations at 50% discount to its averages and dividend yield at 9-10%
- COAL has witnessed unprecedented de-rating over the past 2-3 years. Its stock is trading at 7.5x P/E and 3.6x EV/EBITDA – at a 45-50% discount to its long-term averages. Dividend yield has increased to 9-10%. This is a typical trait of a commodity stock at the peak of an earnings cycle. However, the same is perplexing in the case of COAL, as 81% of its revenue is non-cyclical.
- While incessant selling by promoters is a drag on the stock, concerns over coal demand are unjustified. Even if India were to fully tap its RE potential, coal demand will still increase more than 3x.
- We expect a CAGR (FY18-21) of 12% in adj. EBITDA and 16% in EPS. We value the stock at INR281, based on 5x EV/EBITDA. Maintain Buy.
Piping hot news
Centre clears ₹48,239 cr. recapitalisation package for PSBs
- The government has approved the disbursal of a recapitalisation package of ₹48,239 crore for 12 public sector banks, Financial Services Secretary Rajiv Kumar announced on Wednesday. A total of ₹15,982 crore is to be disbursed to Allahabad Bank and Corporation Bank, both of which fall within the first objective. Bank of India and Bank of Maharashtra, which recently exited the PCA category, are to receive a total of ₹4,843 crore. The bulk of this (₹4,638 crore) is allocated for Bank of India. Four of the non-PCA banks (Punjab National Bank, Union Bank, Andhra Bank and Syndicate Bank) will get a total of ₹14,879 crore.
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