Coal news and updates

CIL rallies 5% on Rs 18,000-cr dividend, but brokers cut target price

Shares of Coal India rallied as much as 5.1 per cent a day after the coal giant announced a Rs 18,317-crore dividend for 2013-14.

The company's announcement of a Rs 29 per share dividend is being seen as a positive move by the brokerages; but then they are cutting the traget price on the stock.

The dividend "partially addresses investor concerns on potential mis-utilisation of surplus cash, besides moving in the direction of rightsizing the balance sheet," a report by Kotak Securities says.

Although the brokerage maintains its 'buy' rating on the stock, it has lowered its target price to Rs 350 from Rs 360 earlier.

"While a miss on volume targets and continued grade slippage may impact earnings in 3QFY14E, the regular increase in notified prices of coal is encouraging. At 7X P/E and about 10% dividend yield (for 2014), valuations are hard to ignore," the brokerage said.

According to JPMorgan, the dividend offered by the company is much more than the estimates.

"This is a positive for the stock and will provide it with near-term support," it says.

The brokerage has cut its FY14-16E EPS estimate by 6-9 per cent on lower EBITDA and lower other income.

It has maintained a 'neutral' rating on the stock and lowered target price to Rs 295 from Rs 310.

Macquarie is of the view that Coal India surprised the market by declaring a dividend of Rs 29 per share versus expectations of Rs 14-20 per share as indicated by the futures discount.

With the overhang of disinvestment behind, the market will likely focus on fundamentals such as price hikes, volume growth and governments' efforts on regulatory bottlenecks, it says.

"Coal India is 30 per cent cheaper than regional peers. We think now is the time to buy the stock," the brokerage says.

It has cut Coal India's EPS estimates by 6-9 per cent for FY14-16 factoring lower other income and volume. The target price has been lowered to Rs 353 from Rs 360.

Deutsche Bank has 'buy' rating on the stock with a 12-month target price of Rs 325 per share given the attractive FCF and Dividend yields. It expects near-term concerns on volume growth could continue.

"The company, even after this dividend, should continue to have a large cash reserve of Rs 90 a share by FY14-end," the brokerage says.

At 10:30 a.m.; the stock was at Rs 296.60, up 2.31 per cent, on the BSE. It touched a high of Rs 304.95 and a low of Rs 294.65 in trade today.

Source: The Economic Times