Shares of Coal India Ltd on Wednesday hit over a three-year high as many brokerages upgraded its target price after the government-run miner reported stronger-than-expected earnings and interim dividend.
The stock hit a high of Rs 263.30 on the BSE - a level last seen on June 27, 2019 - up over 5.7 percent intraday. At 12pm, the stock was trading at Rs 258 on the BSE - up 3.5 percent from its previous close. So far this year, the stock has surged over 77 percent.
The stock has reported an interim dividend of Rs 15 a share for the second quarter. According to the ICICI Direct report, the firm expected to give Rs 20 per share dividend for the current year of which Rs 15 was already announced. The brokerage firm also expects Rs 22 and Rs 25 annual dividend from the firm in the subsequent years.
"Coal India has been a role model stock of being appreciative in terms of value rising by around 50 percent in the past one year coupled with an attractive dividend payout ratio that culminates into a healthy dividend yield. So, it is not mere luck for investors but a pair of luck. With this estimated dividend, we expect the yield is either likely to remain attractive or appreciation will follow in the stock. Either way, the investor in the stock will rejoice," an analyst said on condition of anonymity.
The company reported a 106 percent on-year growth in consolidated net profit at Rs 6,044 crore. Sequentially, the profit was down 32 percent. Consolidated revenue for the state-owned coal producer surged 28 percent on-year to Rs 29,838 crore. On a sequential basis, the revenue was 15 percent lower.
"We believe the world has come to terms that fossil fuel cannot be ignored, at least in the near term. Under-investment by the developed economies in the last decade has proven expensive with no alternate sources of Russian NG in sight other than coal," Motilal Oswal said in its recent note.
The brokerage firm has maintained the 'buy' rating on the stock and increased its target price to Rs 325, up 30 percent from current market price.
"Renewables continue to be unreliable with problems either related to (a) availability or (b) costs or (c) storage or (d) safety. As a result, dependence on coal is likely to increase in the near term whether investors prefer the same or not," the report added.
The company produced 139.2 million tonnes (MT) of coal during the quarter, thereby registering an increase of 11 percent from the last year. On a sequential basis, however, the production of coal declined 13 percent. The offtakes for the quarter at 154.5 MT were up 5 percent on-year but were down 13 percent on a sequential basis.
"High demand for domestic coal due to high thermal power PLFs and elevated international coal prices resulted in higher e-auction premiums. This makes us believe CIL will continue to post high growth in subsequent quarters and clock a much better FY23 in terms of volumes and prices," said ICICI Direct in a note to investors.
"It expects e-auction volumes at 80-90mnte at high premiums in FY23. Considering the better-than-expected performance in H1FY23, we revise our estimates. We increased our volume estimate for FY24 to 730mnte from 725mnte. We also increased our e-auction realisation estimates for FY23E (now Rs4,000/te, earlier Rs3,200/te) and FY24 (now Rs2,400/te, earlier Rs2,250/te)", ICICI Securities report added.
The stock now has 20 buy ratings, 2 holds and 4 sell ratings, according to Bloomberg.
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