Buy Coal India; target of Rs 270: Sharekhan

Sharekhan is bullish on Coal India has recommended buy rating on the stock with a target price of Rs 270 in its research report dated August 08, 2023.

Broker Research

August 12, 2023 / 11:07 IST

Buy

26 Aug, 2025 12:21

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Sharekhan's research report on Coal India

Q1 results were strong with a sharp 36% beat in consolidated PAT at Rs. 7,971 crore (up 44% q-o-q) led by better-than-expected margin given significantly lower employee cost and a marginally higher blended realization partially offset by lower other income. FSA/e-auction realisation of Rs. 1,536/Rs. 3,742 per tonne was 2%/30% above our estimate. E-auction premium of 144% was lower q-o-q but was above expectation of 90%. Coal offtake of 187mt (up 5% y-o-y; flat q-o-q) with FSA/e-auction volume at 168 mt/16mt, flat q-o-q. Soft international coal prices would lower e-auction realisations, while we expect Coal India (CIL) to take FSA coal price hike to offset higher cost. Also, coal production/offtake has witnessed strong growth of 10%/6% y-o-y during April-July 2023. Overall, we expect healthy earnings momentum to sustain although it would moderate compared to peak PAT seen in FY23.

Outlook

Valuation of 5.6x its FY25E EPS (close to trough valuation) is attractive and the stock offers a high dividend yield of ~10%. Hence, we maintain a Buy on Coal India with an unchanged PT of Rs. 270. Potential stake sale in Bharat Coking Coal Limited (BCCL) and subsequent listing would unlock value.

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