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Coal India shares jump 40% in 6 months on pent-up demand; JP Morgan expects further upside

JP Morgan feels that tightness in coal markets should drive e-auction prices higher. The firm has increased FY22-23 EPS estimates by 9 percent.

September 30, 2021 / 01:22 PM IST
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Coal India shares traded marginally higher early on September 30 taking the total gains in the last six months to over 40 percent.

At 1211 hours, the stock was trading at Rs 185.80, up Rs 0.05, or 0.03 percent after touching an intraday high of Rs 191.50 and an intraday low of Rs 184.55. The share touched its all-time high of Rs 195.80 per share on September 29, 2021.

Global research firm JP Morgan on September 30 retained its overweight call on the stock while raising its target to Rs 238 per share, an upside of 28 percentas it expects the tightness in coal markets to drive up e-auction prices. E-auction is a process that provides access to coal to buyers who are unable to source the dry fuel through the available institutional mechanism. The brokerage firm has increased FY22-23 EPS estimates by 9 percent, according to a CNBC-TV18 report.

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"Fuel supply agreements (FSA) and power price hike are likely to offset wage increase while outstanding receivables continue to fall with outstanding receivables at Rs 13,000 crore against the peak of Rs 23,100 crore," the brokerage firm said in its report.


The mining major might raise prices of dry fuel by at least 10-11 percent to mitigate the impact of increased costs and an impending wage revision, sources told news agency PTI.

The Kolkata-headquartered company had last hiked coal prices in 2018. Its current average regulated price realisation is Rs 1,394 per tonne, the news agency said.

“The demand is quite huge, international coal that was coming into the country, the imported coal has almost come down substantially. Power plants, which were operating on imported coal have stopped production so the demand for domestic coal is very high. I feel that this demand is likely to continue in the coming four or five or six months," said Pramod Agrawal, CMD of Coal India in an interview with CNBC-TV18.

"In that scenario, we are committed to meet the demand of the country, and we have been given a target of 740 million tonnes of dispatch this year, but I feel realistically, it will be somewhere near 710 to 730 million that we are likely to achieve this year," he added.

"Our cash would have increased from Rs 17,000 crore to Rs 25,000- Rs 30,000 crore by now. So our balance sheet is quite strong; we have brought a lot of cash. Coming to the dividend policy, we have always been saying that our EBITDA will be in the range of 30 percent, so we will try to maintain it this year also," he added.


Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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first published: Sep 30, 2021 01:22 pm
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