Motilal Oswal's research report on Coal India
COAL’s result highlights a sequential recovery in e-auction realizations. This, combined with lower-than-expected costs, led to a beat on our numbers. Adjusted EBITDA (excluding OBR) at INR80b was 38% ahead of our estimate. For the first two months of FY22, COAL’s dispatches are up 38% YoY. With improving offtake and realizations, we see operating leverage coming into play in FY22. Notwithstanding any further negative shocks, we expect COAL’s profitability to recover in FY22 (+23% YoY). Capex run-rate is likely to increase in the near-term, but higher dispatches and some normalization in receivables should aid cash generation and help maintain dividend (dividend yield: 11%). We reiterate our Buy rating with a TP of INR185/share, based on 4x FY22E EV/EBITDA.
Outlook
At 3.2x FY22E EV/EBITDA and 6x FY22E P/E, COAL remains attractively valued and implies a PV of just 10 years of future cash flows. We maintain our Buy rating on COAL with a TP of INR185/share, based on 4x FY22E EV/EBITDA.
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