Edelweiss Securities has upgraded the country's largest coal miner to Buy from Hold with a target price of Rs 325, citing waning operating performance concerns and favourable risk-reward.
Coal India share price rallied 2 percent ahead of likely divestment by the government before August-end and after Edelweiss Securities upgraded the stock to Buy from Hold.
The government aimed to sell at least 1.5 percent equity stake in Coal India and also 7-10 percent in NLC India by August 31, reports CNBC-TV18 quoting NewsRise.
It is likely to raise total Rs 3,300-3,600 crore from stake sales in Coal India and NLC India.
As of June 2018, the Government of India holds 78.32 percent stake in Coal India and 84.04 percent in NLC India.
Meanwhile, Edelweiss Securities has upgraded the country's largest coal miner to Buy from Hold with a target price of Rs 325 (implying 22.5 percent potential upside), citing waning operating performance concerns and favourable risk-reward.
It perceives 23 percent upside potential from current market price and an additional dividend yield of 6-7 percent over next two years. "Riding robust operating performance in Q1FY19 and attractive valuation, we see CIL as a good defensive play in a sector fraught with uncertainties."
The research house feels Coal India is immune to the macro concerns on the metals & mining sector compared to peers as it is a domestic story with little correlation of its valuation with international coal prices.
Edelweiss is upbeat on Coal India's Q1FY19 operating performance as: 1) sales volume has jumped 11.2 percent YoY to 153 million tonne; and 2) channel checks indicate that the e-auction premium has sustained at around 70 percent on firm international coal prices & domestic demand. "Moreover, profitability concerns are receding as: a) wage hike provisioning seems to be over; and b) additional evacuation capability of 26mtpa from Jharsuguda & Tori sidings is estimated to drive further volume growth."At 13:58 hours IST, the stock price was quoting at Rs 267.70, up Rs 2.45, or 0.92 percent on the BSE.