IPO Note: Coal India Ltd – 'Maharatna in the making' - Subscribe
Price band Rs225-245
Coal India Ltd (CIL) is the best play to ride on the increasing coal deficit in the country. CIL enjoys a near monopoly with a dominant 82% share in domestic coal production and is the world's largest coal producing company. Being one of the lowest cost producers globally (US$16/ton) has enabled it to maintain healthy margins despite selling coal at a huge discount. We estimate OPM to expand 260bps over FY10-12 led by 1) 5.5% CAGR in volumes 2) improving product mix to align with market prices 3) cost savings measures and productivity improvement. These would drive earnings CAGR of 15.1% over FY10-12E.
At the upper band of Rs245, CIL would trade at 12.1x P/E and 6.4x EV/EBIDTA on FY12E. Employees and retail investors will be given the benefit of 5% discount on the final price. We believe CIL would trade at a premium, considering the lower earnings volatility, robust balance sheet and large resource base. We recommend 'Subscribe' to the issue with a fair value of Rs300.
http://content.indiainfoline.com/wc/research/researchreports/Coal_India_151010.pdf
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