Coal India’s adjusted Ebitda is likely to rise at a 12.8% CAGR to Rs 38,600 crore by FY20, largely benefiting from operating leverage, transparent pricing for the non-power sector and 10% volume CAGR.

In the recent analyst meet, the management reiterated its focus on growing production. We value the stock at Rs 439, based on DCF valuation (WACC of 12.8%).

The stock is trading at an EV of 6x FY17E adjusted Ebitda. Even if we were to cut e-auction prices by 8% in view of falling Richards Bay Index to ~$50/t (v/s est of $55/t for FY17E), Coal India will still deliver an EPS of R23.8/share in FY17; this will ensure a minimum dividend per share of INR17- 18/share at 90% payout, which implies an attractive dividend yield of 5.1% at the minimum.

We believe the e-auction prices and demand will recover along with recovery in domestic Industrial activities. The current stock price is factoring in very low coal prices corresponding to an RB Index (6000 Kcal/t) lower than $40/t. At RB Index of $40/t, the DCF value is arrived at Rs 345/share.

Coal India dispatches in September 2015 grew 15% YoY to 40.4mt, the best ever monthly growth. YTD dispatch growth now stands at 9.3% YoY, tracking our full-year growth estimate of ~9%.Production in September grew 6.6% YoY to 37.2mt, with YTD growth now at 8.9%. Encouragingly, media articles report that overburden removal for the six months ended September is up a massive 37% YoY — a pre-cursor to strong production volume growth ahead.

We believe the sharp jump in dispatches during the quarter is partly attributed to weaker monsoon and higher dispatches to the non-power sector.

Our analysis of India’s coal consumption suggests that the decline in e-auction realisation is not only a factor of lower global thermal coal prices, but could also equally be due to fall in domestic coal consumption.

India’s coal consumption (implied based dispatches by Coal India, SCCL and captive mines, imports and inventory change at IPPs) fell ~13mt (or 3.8%) YoY to ~317mt during Apr-Aug; despite the demand headwind, Coal India’s dispatches grew 9% during the same period.

Demand weakness is more evident in the non-power sector where consumption is down ~14mt YoY to ~129mt. Demand from the power sector grew marginally to ~188mt.

Shares of Gujarat NRE Coke surged almost 20 per cent today after the company said its board has approved the sale of its wind mill business for Rs 218.75 crore. (Photo: PTI)

Shares of Gujarat NRE Coke surged almost 20 per cent on Tuesday after the company said its board has approved the sale of its wind mill business for Rs 218.75 crore.

The stock zoomed 19.75 per cent to settle at Rs 3.76 — its upper circuit limit — on BSE.

At NSE, shares of the company soared 19 per cent to touch its upper price band of Rs 3.75.

In terms of volume, 31.83 lakh shares of the company changed hands at BSE and over 78 lakh shares were traded at NSE during the day.

“Gujarat NRE Coke Ltd has received approval from its shareholders for the sale of its 62 wind mills in Gujarat for a total wind power energy production capacity of 87.5 MW,” the company said in a regulatory filing on Monday.

The meeting of the board of directors was held on Monday.

“The company has been successful in entering into agreements for the sale of the entire wind mill business for an amount of Rs 218.75 crore,” it said.

“With the expected upturn in the country’s industrial scenario, we expect to ramp up our capacity utilisation in the near future,” company’s chairman & MD Arun Kumar Jagatramka said.

The proceeds of the sale, he said, will help in improving the company’s cash flows, thereby helping the faster revival of Gujarat NRE Coke operations.

Indian Overseas Bank (IOB) shares fell after it said that Reserve Bank of India has taken “prompt corrective action” on the bank with the view to improve internal processes to deal with mounting non-performing assets.

Indian Overseas Bank (IOB) shares fell 2 per cent on Tuesday after it said that Reserve Bank of India has taken “prompt corrective action” on the bank with the view to improve internal processes to deal with mounting non-performing assets.

At 10.55 am, shares of IOB were down 1.87 per cent at Rs 36.65. Sensex was trading 82.21 points up at 26,867.76 during the same time.

“The RBI has initiated a prompt corrective action on the bank and that this action will not have any material impact on the growth prospects or performance of the bank,” IOB said in a filing on BSE.

The shares of the bank have slumped 41.3 per cent so far this year, under-performing a 6.1 pct fall in the NSE bank sub-index

Deepak Tewary, analyst at SPA securities, says RBI order is likely “precautionary” and intended to help improve IOB’s performance. He added IOB’s return on assets was below RBI’s threshold of 0.25 per cent for the three out of last four quarters, and may have triggered the action.

He expects measures to remain in place for at least two quarters.

With agency inputs

The stocks of Coal India ans NTPC will be in focus as Credit Suisse has upgraded their stocks to to “outperform” from “neutral” on power distributors’ restructuring. (PTI)

The BSE Sensex opened on a positive note on Tuesday following positive global cues. NSE Nifty opened above 8,150. At 9.15 am, Sensex was up 174.54 points at  26,960.09. Similarly, Nifty was up 43.65 points at 8,162.95 during the same time.

Stocks that are likely to be in focus today:

Coal India and NTPC: The stocks of the companies will be in focus as Credit Suisse has upgraded their stocks to to “outperform” from “neutral” on power distributors’ restructuring.

Sun Pharma: Cipher Pharma Inc, along with partners Ranbaxy – a Sun Pharma firm – and Galephar Pharmaceutical Research, has entered into a patent litigation settlement with Actavis over generic version of Absorica, a drug used to treat acne.

HDFC: Country’s largest mortgage lender on Monday cut benchmark lending rate on housing loans by 0.25 per cent to 9.65 per cent, a move which will lower the EMI for borrowers.

Indian Overseas Bank (IOB): RBI has taken “prompt corrective action” on state-run Indian Overseas Bank (IOB) with the view to improve internal processes to deal with mounting non-performing assets

The BSE Sensex and NSE Nifty are likely to open in green on Tuesday tracking SGX Nifty and positive global cues. (PTI)

The BSE Sensex and NSE Nifty are likely to open in green on Tuesday tracking SGX Nifty and positive global cues.

At 8.28 am (IST), SGX Nifty was up 56.50 points, or 0.69 per cent, at 8,196.50.

The prospect of a delay in the US Federal Reserve’s plan to raise interest rates and signs of some stability in oil and commodity markets boosted Asian stocks on Tuesday. Hang Seng and Nikkei were up 0.29 per cent and 1.49 per cent, respectively.

Japan’s Nikkei extended the rebound from eight-month low hit a week ago, helped by speculation that the Bank of Japan might adopt stimulus to support the flagging economy. The BOJ also starts its two-day policy meeting on Tuesday.

US stocks rallied Monday on renewed hopes that the Federal Reserve will delay raising interest rates. The recent readings on the US economy could force the Fed to wait until next year. The Institute for Supply Management released a report on non manufacturing index showing that growth in the service sector slowed by more than expected. US’s Dow Jones Industrial Average index jumped 1.85 per cent at 16,776.43 on Monday.

Back home, benchmark indices gained more than 2 per cent on Monday, posting their biggest single-day percentage gain in nearly nine months as expectations for a US rate hike faded after weaker-than-expected US jobs data. The Sensex gained 2.15 per cent to end at 26,785.55, while the Nifty rose 2.12 percent to end at 8,119.30. Both posted their biggest single daily gains since January 2015.