Coal India Limited’s shares surged 2.12% on Tuesday’s intraday trades to reach a fresh 52-week high of ₹ 235.50. Their share price surged 4.85% in the past five days and 10.15% in the past month. The shares are currently trading at ₹ 234.30 apiece.

Coal India’s shares have risen by 50.90% as per year-to-date data. They reached their all-time high of ₹ 447.25 apiece on August 05, 2015, and their all-time low of ₹ 109.5 on October 15, 2020. They reached their 52-week low of ₹ 139 apiece on August 30, 2022. 

Brokerage firm Motilal Oswal Financial Services expects that the global demand for coal will remain strong in the near term. The world is recovering from the pandemic and Europe has shifted to renewables (in the long term) from Russian gas, increasing dependency on coal in the near term.

“Coal India trades at 3.0x/4.3x our FY23/24E EV/Adj. Ebitda. We expect a 10% dividend yield at current market price, as we forecast strong earnings to result in healthy dividends going forward. We raise our FY23/24E Adj. Ebitda by 6%/2%, respectively, and increase our TP to Rs 290 (from Rs 275), premised on 4x FY23E EV/Ebitda. Maintain Buy,” said the brokerage firm in its report. This translates to an upside of 23.77%.

Motilal Oswal Financial Services believes that with a continued heat wave in China, hydro production should reduce further, increasing reliance on thermal coal. Further, they believe that Europe will continue to re-open as well as increase the lifecycle of its remaining thermal power plants and in the process will fuel demand for thermal coal.

They said that India’s consumption of coal will remain strong. Resultantly, its imports will go up in the near term. The demand for Indian coal will increase as Europe continues to buy South African coal. As a result, port-based plants in India will remain shut or operate at a lower rate, putting pressure on domestic coal-based plants to ramp up generation.

Motilal Oswal expects FY23 e-auction premiums to remain in triple digits at least as Coal availability for e-auction has reduced drastically with most of the coal being diverted to the power sector. A few factors like increasing competition; rising price of South African coal will prompt domestic consumers of South African coal to shift to domestic coal.

Written by Simran Bafna


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