Kotak Institutional Equities: Maintain ‘buy’ on CIL with fair value of Rs 285/share

Coal India reported 20% y-o-y decline in dispatches in September 2019 due to flooding of mines on account of excessive rains. Production volumes traced dispatch numbers and declined by 23.5% yoy in September 2019. E-auction premiums increased to 87% in August 2019 even as inventory across plants declined with four units reporting critical inventory of coal. Maintain BUY rating with fair value of Rs 285 on an improved earnings trajectory and attractive valuations (6X P/E on FY2021E adjusted earnings).

Coal India reported a decline of 20% yoy with dispatch volumes of 35.2 mn tons in September 2019—the fifth consecutive month of weak dispatches. Dispatch volumes in 1HFY20 at 275.8 mn tons have declined 5.2% YTD. CIL volumes in 2QFY20 were at 122.5 mn tons, a decline of 11% yoy. We note that dispatch volumes have remained sub-5% for 11 out of 12 months since September 2018 in comparison to 5.2% CAGR in volumes achieved by CIL over the past five years. Production in September 2019 was at 30.8 mn tons, showing a decline of 23.5% yoy due to flooding of mines on account of heavy rainfall during the