Prabhudas Lilladher is bullish on Coal India has recommended buy rating on the stock with a target price of Rs 155 in its research report dated June 29, 2020.
Prabhudas Lilladher's research report on Coal India
Coal India (COAL) reported Q4FY20 EBITDA in line with our and consensus expectation. Balance sheet quality continued to deteriorate due to 162% YoY increase in receivable at Rs144bn, incremental advance tax payment of Rs47bn and 19% increase in inventory. Receivables are expected to further increase ~50% by Q2FY21e due to poor financial condition of State govts. In spite of attractive valuations (EV/EBITDA at 3.5x FY21e), stock would continue to underperform due to frequent stake sale by Govt and pressure on profitability in E-auction (contributes>50% of EBITDA) in light of weak global prices and increased competition with opening up of sector for commercial mining.
Outlook
Given the weak outlook on global coal prices and steep rise in domestic availability (with limited opportunity in exports), we downgrade the stock to Hold with TP of Rs155 (earlier TP of Rs195).
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