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Coal India
Investment case: We have a Buy rating on Coal India (CIL), because we
believe the recent share price correction is overdone. We believe the correction
has been led by negative newsflow on: 1) the proposed mining tax; 2) concerns
about wage negotiations; 3) a production miss in H1 FY12; and 4) concerns over
delays in getting environmental/forest clearances and approvals needed to drive
volume growth. However, we believe the structural theme is intact and that these
concerns do not impact the structural positives, ie: 1) strong domestic coal
demand; 2) a virtual monopoly; 3) ASPs significantly below global prices—
leaving the potential for price hikes; 4) low earnings volatility; and 4) the
company’s status as one of the lowest cost producers globally.
Valuation: Our FY13 PAT estimate of Rs169bn is marginally above the
consensus estimate. We continue to value CIL on 15x FY13E PE. We have a
Buy rating on the stock with a price target of Rs400.00.
2012 Catalysts: We believe markets have reconciled themselves to the fact that
CIL will struggle to meet its production/despatch targets. We believe
expectations on the stock are currently very low. We believe key triggers would
be: 1) any favourable buy back scheme by CIL; 2) environmental and forest
clearances for the new mines; 3) progress in ordering activity for washeries; and
4) if e-auction volumes remain approximately 11% of total volumes.
read details and other companies in list (click link below)
UBS India – Outlook 2012 ::Most & Least Preferred Stock Ideas for 2012
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