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Overweight Rating on Coal India: Morgan Stanley

Morgan Stanley has recommended an 'Overweight' rating on Coal India.

  • In April '11 - February '12, CIL's cumulative production was up 0.3% YoY at 382 mt. However, January '12 and February '12 saw YoY growth of 6% and 17%, respectively.If CIL was to deliver 5-6% production growth in March '12, the company could exceed F12 forecast of 433 mt by ~1%.

  • While one month performance may not reveal much, Morgan Stanley feels this still displays the following -CIL's poor performance in 1HF12 was indeed due to factors beyond its control and hence reversible in FY13, and the PM's office is finally starting to look at the root cause of the problems for coal and power sector, i.e. hurdles for CIL's production growth.

  • A quick resolution on two key areas, which we think should be doable for the government, would be key for CIL to achieve production growth of 8-9% YoY in FY13: environmental clearances for mining areas adjacent to existing mines, and removal of illegal encroachers from coal mining areas where the number of such people are few and where the environmental approvals are already in place.

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