Macquarie maintains underperform on Coal India
Mumbai: Macquarie has maintained an 'underperform' rating on Coal India with a target price of Rs 250 after the company announced an interim dividend of Rs 18.75 per share.
The brokerage firm said that while the dividend was marginally higher than estimated, it is down 32% from the dividend of Rs 27.4 in FY16, in sync with the earnings decline in the nine-month period ended December and higher capital expenditure requirements.
The brokerage said that a mix of buybacks by subsidiaries and dividends by Coal India is highly tax inefficient with a tax leakage of 39%. A higher capital expenditure requirement and weak earnings is reducing Coal India's ability to maintain high dividends, it said.
"Despite tax-efficient solutions, COAL (Coal India) appears to keep the interests of government above minority shareholders. With stagnant earnings and a step-up in capex, we expect dividend yield to remain ~5% in FY18-19E and trigger a de-rating," said Macquarie.
Shares of Coal India were flat at Rs 323.70 in afternoon trade on the BSE. Macquarie's target price implies a downside of nearly 23% from current levels.
The brokerage firm said that while the dividend was marginally higher than estimated, it is down 32% from the dividend of Rs 27.4 in FY16, in sync with the earnings decline in the nine-month period ended December and higher capital expenditure requirements.
The brokerage said that a mix of buybacks by subsidiaries and dividends by Coal India is highly tax inefficient with a tax leakage of 39%. A higher capital expenditure requirement and weak earnings is reducing Coal India's ability to maintain high dividends, it said.
"Despite tax-efficient solutions, COAL (Coal India) appears to keep the interests of government above minority shareholders. With stagnant earnings and a step-up in capex, we expect dividend yield to remain ~5% in FY18-19E and trigger a de-rating," said Macquarie.
Shares of Coal India were flat at Rs 323.70 in afternoon trade on the BSE. Macquarie's target price implies a downside of nearly 23% from current levels.
