Coal India, the world's largest coal miner, experienced a consistent surge in its stock price in September. It began the month at ₹230 apiece and has since soared to its present value of ₹297, yielding a return of 29%.
This marks the stock's largest monthly gain since its listing in November 2010, surpassing its previous best monthly performance recorded in May 2014. Furthermore, in Friday's trading session, the shares soared by nearly 2.5%, reaching ₹297.3, a level not witnessed in five years.
During the first six trading sessions of September, Coal India shares skyrocketed by nearly 23% after the company reported strong operating performance for the fifth month in a row with both production and sales volume, sustaining historical highs.
On September 01, the company posted a 13.2% growth in its output at 52.3 million tonnes (MT) for August 2023, compared to 46.2 MT in the year-ago month. In FY23–24 so far, the state-owned coal miner produced 281.5 MT, an 11.1% YoY growth.
Total coal supplies to all consuming sectors shot up to 59 MTs in August 2023, reflecting a strong double-digit growth of 15.3% compared to 51.2 MTs in the same month last fiscal. Supplies were up nearly 8 MTs in a single month.
During April–August 2023, total coal off-take rose to 305.5 MTs, a 22.4 MT gain over the same period last year, when the off-take stood at 283.1 MTs. The company continued to pump higher quantities of coal to the non-power sector (NPS) as supplies to them recorded a robust 61% YoY growth at 12.1 MTs in August 2023.
In a recent report, domestic brokerage firm Sharekhan highlighted several factors contributing to Coal India Limited's (CIL) potential for sustained robust margins. Firstly, the brokerage emphasised the increasing volume of the non-power sector (NPS), which tends to yield better realisations.
Secondly, it mentioned the advantage of operating leverage, driven by a strong outlook for coal offtake. Lastly, Sharekhan pointed to the potential for a hike in FSA (Fuel Supply Agreement) coal realisation, further bolstering CIL's margin prospects.
The brokerage revised its earnings estimates for FY2024 and FY2025 upwards by 7% each to account for higher volume, an improved volume mix favoring NPS, and better absorption of fixed costs due to operating leverage benefits.
It maintained a 'buy' rating on the stock with a revised target price of ₹330 apiece. It also noted that a potential stake sale in Bharat Coking Coal Limited (BCCL) and subsequent listing could unlock further value.
For the April-June quarter of FY24, the coal miner reported a 10% YoY drop in its consolidated net profit to ₹7,941.40 crore. When compared to the preceding March quarter, the net profit improved by 43.55%.
The YoY drop in net profit was primarily due to higher employee costs, which shot up 20% YoY to ₹12,027.48 crore, owing to the provisioning of a balance left of ₹8,000 crore for a wage hike of 20% announced for non-executive workers.
21 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.