Rs 15.25/Share Dividends Soon: Coal India Stock At Sky-High; 2 Brokerages Recommend Buy For TP Rs 380

The largest government-owned coal producer in the world, Coal India has witnessed some impressive gains since the start of Samvat 2080. This is also because the company has delivered strong Q2 numbers and declared hefty dividends. On Wednesday, continuing on its bull run, Coal India shares touched a new 52-week high on both BSE and NSE during the trading hours. The stock has touched back-to-back new highs in the past few days.

On BSE, Coal India shares ended at Rs 350.55 apiece, marginally up from the previous closing. However, it clocked a new 52-week high of Rs 359.80 apiece and has a market cap of over Rs 2.16 lakh crore.

Last week, Coal India declared its September quarter earnings for FY24 where it posted over 12% growth in consolidated net profit to Rs 6,813.50 crore, as against Rs 6,043.99 crore in Q2 of the previous fiscal. Consolidated net sales stood at Rs 29,978.01 crore in Q2FY24, as against Rs 27,538.59 crore in Q2 of FY23.

Production stood at 157.426 million tonnes in Q2FY24 versus 139.228 million tonnes in Q2FY23. Offtake stood at 173.731 million tonnes in Q2FY24 as against 154.533 million tonnes in Q2FY23.

Further, Coal India also announced its first interim dividend of a whopping Rs 15.25 per share having a face value of Rs 10 each for FY24. In percentage terms, the dividend is to the tune of 152.5%.

The company fixed November 21 as the record date to determine eligible shareholders for the first interim dividend. While the date of payment shall be by December 9, 2023.

Brokerages Motilal Oswal and Axis Securities have recommended buying Coal India shares and have set Rs 380 per share as the target price.

In its research note, Motilal Oswal said, "Considering the huge demand from the power sector, COAL has maintained its FY24E target dispatch to the power sector at 610mt." It added, "Ministry of Power has set FY24 electricity generation target at 1,750bu (growth of 7.2% YoY) of which, 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, e-auction premiums, and lower costs, we have increased our EBITDA estimates by 16%/13% for FY24/FY25. The stock is trading at 4.1x on FY25E EV/EBTIDA. We retain our BUY rating with a revised TP of INR380, valuing the stock at 5x FY25E EV/EBTIDA. COAL remains our top pick in the mining sector," Motilal Oswal concluded.

Also, in its note, Axis Securities said, "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)."

Lastly, Axis Securities note said, "We value the stock now at 4.5x 1-year forward EV/EBITDA multiple on FY25E Adj. EBITDA (from 4.0x) on higher production and demand visibility (see Exhibit 4). We arrive at our target price of Rs 380/share (from Rs 265/share), implying an upside of 17% from the CMP."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor 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.