Coal news and updates

Coal India may go for broad based price hike in June quarter

According to Nomura, CIL, the country's largest coal producer, would come up with weak Q4 results and then go in for a broad based hike in notified coal prices

Coal India Ltd (CIL), the countries largest coal producer may come out with weak results due to lower year-end incentives and grade compliance-linked provisioning plus capped realisations. After the results, the coal producer would likely go in for a broad-based hike in notified coal prices in 1QFY15, says Nomura in a research note.

Nomura said it believes that during FY2015 coal production/ offtake forecasts for CIL of 488mt/496mt (up 5.5%/5.1% year-on-year) appear achievable, although offtake in April 2014 is up only 2% year-on-year.

Nomura's discussion with Coal India management focused on prospects of meeting stiff coal production/ offtake targets for FY2015, ongoing grade compliance exercise, and whether a change of guard at the Centre can materially facilitate clearances and build-out of mining/rail projects critical to CIL for augmenting output and offtake beyond 550mtpa.

“A Central Government with visibly stronger impetus on ensuring Centre-State administrative coordination to facilitate time-bound project clearances (environment/ forest clearances) and build-out of key rail projects would boost volume-led earnings growth prospects and bolster a longer-term investment case in CIL,” the research note added.
 
On the CIL share in the stock market, Nomura has recommended a 'Buy' rating. The target price is Rs315. On FY16F normalized earnings, the stock trades at 8.5x P/E (EPS of Rs35.1) and 4.7x EV/EBITDA (10.1x P/E and 6.0x EV/EBTIDA on reported earnings). At CMP (current market price), the stock offers a total potential 12-month return of 11.5% (including a dividend yield of 5.4%).

Source: Moneylife