Shares of Coal India traded volatile in intraday trade on August 11 as the stock rose about 3% to hit its fresh 52-week high of ₹226.10 but then slipped about half a percent to trade in the red.
On August 10, the company reported a 178.65% jump in its consolidated net profit at ₹8,832.86 crore for the June quarter of the financial year 2023 (Q1FY23). The company had posted a profit of ₹3,169.86 crore in the year-ago period.
Revenue from operations stood at ₹35,092 crore, up 38.8% for the quarter under review as against ₹25,282 crore in the year-ago quarter. It earned ₹4,340 per tonne from the e-auction of coal. Coal India sold nearly 21 million tonne (MT) through e-auction during the April-June 2022 quarter.
Brokerages remain positive about the stock
Brokerage firms are mostly positive on Coal India due to its Q1FY23 performance, an uptick in volume and healthy e-auction bookings.
Global brokerage firm CLSA maintained a buy call on Coal India with a target price of ₹250. As reported by CNBC-TV18, CLSA said Coal India's Q1 EBITDA was above the estimates driven by better realisations. The brokerage firm said the focus will now shift to wage negotiations as the outcome of wage negotiations and FSA price increase is the keys to outperformance.
Among the domestic brokerage firms, Motilal Oswal Financial Services also maintained a buy call on the stock with a target price of ₹275. It has raised FY23 EBITDA and PAT estimate by 23% each and the same for FY24 by 9% and 11% respectively.
Motilal believes the company is on track to achieve its FY23 production target of 700mt as demand remains robust. However, it added that Coal India is unable to meet the requirement of even the power sector and has to resort to imports to partly bridge the gap.
"We expect port-based power plants in India to remain non-operational or prohibitively expensive as international coal prices increase, leading to pressure on Coal India to divert additional coal to the power FSA category, leaving the NRS in the lurch, and, in turn, boosting e-auction premiums," Motilal Oswal said.
"We also note that the integration of all five varieties of auction into a single e-auction has significantly increased the price discovery of coal and has resulted in a structural shift in e-auction premium. With a strong profit generation scenario, we raise our FY23 e-auction premium forecast to 126% from 108%, with a probability of further hikes," the brokerage firm added.
Edelweiss Securities also maintained a ‘buy’ call on the stock with an unchanged target price of ₹250 on 6 times Q2FY24E EBITDA.
"We believe, robust performance will likely sustain on firm e-auction prices/volume uptick. We believe, Coal India’s cash accretion is likely to get a boost from the robust operating performance, leading to a healthy dividend yield of 9-10% per annum," Edelweiss said.
Another brokerage firm ICICI Securities also maintained a 'buy' call while it raised the target price to ₹294 from ₹258 earlier.
The brokerage firm highlighted that Coal India's strong performance was despite cost pressures and sets a very high bar for the coming quarters.
"We believe Coal India will continue to perform well as factors which were at play in the past two quarters will
continue – high thermal power demand, high international coal prices and subsequent increase in demand for domestic coal, leading to higher e-auction premiums," said ICICI Securities.
According to a MintGenie poll, an average of 23 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations are those of individual analysts or broking firms and not of MintGenie.