Motilal Oswal Maintains Buy Rating for Coal India, Targets Rs 530
Coal India's Financials Get a Boost After Audit-Led Reassessment
Motilal Oswal's research report has shed light on the recent developments in Coal India's financials, following an audit-led reassessment of coal levy accounting. The company has retrospectively restated its FY24/25 financials, shifting certain levies from an agent to a principal basis. This adjustment has led to the inclusion of collected cess in revenue and adjustments to other expenses.
The reassessment has covered various areas, including coal cess equalization balances, correction of capital asset misclassification, deferred tax recognition errors, and regrouping of prior-period expenses. This move is expected to have a positive impact on the company's financials.
Outlook and Recommendations
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
At the current market price (CMP), Coal India is trading at 5x on FY28E EV/EBITDA. Motilal Oswal's analysts have reiterated their BUY rating for the company, with a target price (TP) of INR530. This valuation is based on an expected multiple of 6x FY28E EV/EBITDA.
| Multiple | FY28E EV/EBITDA |
|---|---|
| Current | 5x |
| Target | 6x |
Note: This table provides a comparison of Coal India's current and target multiples, highlighting the expected increase in valuation.
Investor Takeaway
Investors should consider buying Coal India stock with a target price of Rs 530.
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