5.2% Yield, 52.5% Dividend; Maharatna Coal India Hits New 1-Year High; Motilal, Axis Sec Recommend BUY

Coal producing behemoth, Coal India touched a new 52-week high of Rs 479.90 apiece on Thursday. The large-cap is among the top gainers on Nifty 50. The upbeat performance comes after Coal India's strong Q3 and upcoming dividend recommendation. Holding a 5.2% yield, Coal India is set to reward investors with the interim dividend of up to 52.5% ahead. Brokerages Motilal Oswal and Axis Securities are the latest to recommend buying on CIL.

Coal India Share Price:

CIL's share price traded at Rs 475.35 apiece, up by 1.92% on BSE with a market cap of nearly Rs 2.93 lakh crore, at the time of writing. The stock hits a new 52-week high of Rs 479.90 apiece in early deals.

CIL's share price is up by 131% from its 52-week low of Rs207.70 apiece.

There is further potential for upside in CIL with the next target price ranging from Rs 490 to Rs 500.

Coal India Interim Dividend:

CIL, which is the world's largest government-backed coal company, announced a second interim dividend of Rs 5.25/- per equity share on the face value of Rs 10/- for FY24.

The company has fixed Tuesday, 20, February 24 as the "Record Date" for the declaration of the 2nd Interim Dividend on equity shares for the Financial year 2023-24.

The date of payment of the "2nd Interim Dividend" for FY 2023-24 shall be by 12, March 2024.

Earlier, the company paid its first interim dividend of 152.5% amounting to Rs 15.25 per share for FY24. Meanwhile, in the previous financial year 2022-23, Coal India paid up to 242.50% dividend aggregating to Rs 24.25 per share.

Coal India Earnings:

CIL's consolidated profit after tax (PAT) rose sharply to an all-time high of Rs. 9,094 Crores in Q3FY24, posting a robust 18% year-on-year growth. This was the highest PAT earning during the third quarter of any year since the company's listing. In absolute volume the PAT jumped by Rs.1,375 Crores compared to Rs. 7,719 Crores in the October-December 2022 period.

Consolidated revenue from operations during Q3 FY 2024 went up to Rs. 36,154 Crores marking a 3% growth over Rs.35,169 Crore of the corresponding period previous fiscal.

Buy Coal India Shares:

Motilal Oswal Target Price Of Rs 490 On Coal India:

According to Motilal, COAL supplies ~89% of its production to the power sector (including CPPs) and thermal power accounts for over 80% of the total power generated in India. Further, to meet the increasing coal requirements of the power sector, COAL has made a long-term commitment via FSA agreements and BLCs. It is on track to achieve a production of 780mt in FY24 with dispatches under e-auction at ~15% of the total volumes.

Also, the brokerage highlighted that India is lagging in its FY30 RE target, and the Ministry of Power has set the FY24 electricity generation target at 1,750bu (growth of 7.2% YoY). Of this, the share of thermal power is expected to be over 75%. This augurs well for COAL to achieve strong coal production in the next few years.

"In line with the strong performance, improved outlook on volume, higher e-auction premiums, and lower costs, we have increased our EBITDA estimates by 15%/9%/10% for FY24/FY25/FY26. The stock is trading at 4.7x on FY26E EV/EBTIDA. We reiterate our BUY rating with a revised TP of INR490, valuing the stock at 5.5x FY26E EV/EBITDA," Motilal said. Coal remains its top pick in the metals and mining sector.

Axis Securities' Target Price Of Rs 500 On Coal India:

CIL has demonstrated a good production run rate so far. It's taking several measures to support its production targets such as i) Using the MDO model (Mine Developer Operators) for greenfield and brownfield mines, ii) FMC (First Mile connectivity) projects for evacuation efficiency, and iii) Using the latest technology for faster evacuation and transport along with focus on exploration. In H1FY24, the total Capex was at Rs 7,065 Cr (FY24 guidance is
Rs 16,600 Cr), as per the brokerage.

Axis Sec revised Coal India's EBITDA upwards for FY24/25E to account for strong Q3FY24 results, led by lower operating expenses. But it keeps the sales volume offtake assumption unchanged at 760/820/880 MT (CIL target is 780/850/1,000 MT).

On valuation, Axis Sec's note said, "We value the stock at 5.0x 1-year forward EV/EBITDA multiple on FY26E Adj. EBITDA (unchanged). We arrive at our target price of Rs 500/share (from Rs 470/share), implying an upside of 15% from the CMP.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.