Stock corner: Maintain ‘buy’ on Coal India with target price of Rs 333

We recently met Coal India’s senior management to understand the revised production targets for FY20E as its earlier target of 660 million tonne seems challenging since H1FY20 output was only 241 MT (down 5.6% y-o-y). The management stated the decline was mainly in August and September when some states faced excessive floods due to which most mines were shut. We have assumed 618 MT for FY20 in our estimates and expect dividends to improve compared to FY19. Maintain ‘buy’ with target price of Rs 333/share.

CIL has produced 241 MT in H1FY20 and is looking to achieve ~625 MT (growth of 3.6% y-o-y). Lower revised target is mainly due to the impact of excessive floods in Chhattisgarh, Jharkhand, Odisha and Maharashtra. With receding water levels, output has picked up in October and is expected to significantly ramp up from November. The contractual issue faced in SECL has now been resolved and although law and order situation at MCL continues to be volatile, major part of the issue has been resolved.