Coal India Rallies Over 20% In A Month; Analysts Predict Up To 26% Upside In The Stock

Coal India share price has been on a roll of late. The stock rose over 20 per cent in the past one month and analysts believe there is still room for another 26 per cent upside for the Coal India shares.

ICICI Securities has maintained a buy advisory on Coal India (CIL) shares. Also, the target price per share has been increased by 25 per cent from Rs 325 to Rs 395. On October 19, 2023, CIL stock closed at Rs 315. In this way, investors can get a strong return of 25-26 per cent at the current share price. So far this year, Coal India shares have shown a rise of about 40 per cent. There was pressure on the company’s shares on Friday (20 October).

Many such sentiments are being formed for the company, which seem ready to support the stock price. Coal India can get production support from its subsidiary and Miniratna Company SECL. At the same time, strong demand from the power sector is expected to remain. E-auction prices may increase due to record increase in imports from China amid the onset of winter. Apart from this, it is expected to accelerate as e-auction volumes and linkages materialize and this will support profits.

The brokerage says that in view of the recent rise in coal prices in the international market and strong 6MFY24 operating performance, the multiple has been increased to 8x (from 7.2x). The target price on this will be Rs 395, which was earlier Rs 325. This view of the brokerage is based on 9 percent dividend yield till FY25E.

As per ICICI Securities, Coal India is at an interesting juncture with both robust volume growth and firm price outlook. For H1FY24, CIL has met the increased requirements of the power sector and has been able to boost dispatches to more profitable non-regulated sectors (NRS).

Additionally, the peak wage bill is now behind, and over the next five years, wage expense is likely to fall due to natural attrition at the company, it said.

The brokerage believes that cash generation would be robust enough for maintaining a dividend yield of 9 per cent p.a. through to FY25E despite an Rs 150 billion capex p.a.