Coal India gains on CLSA upgrade

Shares in Coal India rose 1.7 percent to Rs 360.20 after CLSA upgraded the stock to “outperform” from “underperform” and raises its target price to Rs 390 from Rs 340.

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CLSA said production has improved “substantially” in the April-June quarter and sees a “high” probability that fiscal 2012/13 targets will be met.

Brokerage added the risk of large penalties from failing to meet its delivery threshold in fuel supply agreements with power producers is “low.”

Coal India “offers much higher earnings visibility than its sector peers and we don’t rule out an expansion in multiples as it becomes a place to hide in a sector engulfed with macro risks,” CLSA said.

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“Given a respectable earnings CAGR of 12 percent over FY12-14, much higher earnings visibility than sector peers, dividend yield of 3 percent and shrinking policy risks, CIL’s multiples could expand near-term,” said CLSA.

Reports have also said that the prime minister’s office is also working out a methodology to allow CIL to carry out 25 percent capacity expansion for its existing mines without going through public hearings.

Any relaxation by the ministry of environment and forest on CIL’s projects will improve production outlook beyond FY13.

Agencies