Coal India Gives Over 26% Returns In One Year; Analysts See Up To 23% Further Gains

Coal India Share Price: A government of India ‘Maharatna’ company Coal India has a Buy call from Axis Securities and ICICI Direct. The target price set by Axis is at Rs 225 for a time period of 1 year. Coal India is the largest coal producer in the world and accounts for 80 per cent of the domestic coal production in FY22. It has strategic importance in meeting India’s energy requirement as 51 per cent (as of May’22) of the country’s power generation capacity is derived from coal-based thermal power plants. Coal India’s coal production grew by 4 per cent YoY in FY22 to 623 million tonnes (MT), while dispatch rose by 15 per cent YoY to 662 MT.

Coal India Share Price History

Coal India Ltd’s Current Market Price (CMP) is Rs 263.30/share. The CMP is nearly Rs 51.55/share above the 52-week low of Rs 132.75/share recorded on 23 August 2021. While its CMP is roughly Rs 24.7 below the 52-week high of Rs 209 per share level recorded on 20 May 2022. According to the CMP and the brokerage set Target price of Rs 335/share, the stock could jump nearly 23 per cent in 12 months.

Looking at its performance over the years, it has not performed well in the last 5 years. It moved down nearly 27.68 per cent in 3 years and 24.85 per cent in 5 years. In the last 1 year, it has a positive return of 25.16 per cent, and 0.36 per cent in 3 months.

Coal India Ltd., incorporated in the year 1973, is a Large Cap company (having a market cap of Rs 1,12,654.67 Crore) operating in Mining sector.

Coal India Ltd. key Products/Revenue Segments include Other Operating Revenue and Coal for the year ending 31-Mar-2021.

Axis Securities said: “The company’s EBITDA margins have been healthy and stable averaging 25 per cent over the last decade. This has been on account of abundant coal resources, conducive geological conditions, the company’s improving productivity in terms of output/man-shift due to manpower reduction through the closure of underground mines, higher outsourcing, and Capex on open cast mines and evacuation expenditure. However, the margins dipped in FY18 (14 per cent) as it undertook one-time expenses on provisions towards wage revision and higher production costs (led by grade slippage). Wage revisions are due now and the company expects them to complete by the end of FY23. Keeping this in view, we model a 10 per cent increase in the employee cost along with a 6 per cent hike in blended average sales prices (ASP) to factor in higher e-auction prices and an expected hike in FSA prices (option value).”

Coal India Ltd has a robust financial risk profile with healthy net cash and cash equivalents of Rs 25,870 crore (as of Mar’22). Trade receivables have come down to Rs 11,368 crore in FY22 from Rs 19,623 crore in FY21 leading to positive free cash flow in FY22 (post working capital changes). The company has a Capex plan of Rs 17,000 crore for FY23, primarily on evacuation infrastructure. Despite the proposed Capex and high dividend payout, liquidity will remain robust over the medium term, backed by a robust capital structure and healthy cash accrual. At CMP, the current dividend yield remains attractive at 11 per cent, the brokerage house said.