Comments
Target: ₹430
CMP: ₹380.85
To meet the increasing demand for coal in the power sector amid the government’s strong push to ensure a reliable 24x7 electricity supply, Coal India (COAL) has made a long-term commitment through FSA agreements. Based on YTD performance, COAL is targeting a production of 780 mt in FY24 and 850 mt in FY25.
COAL sells about 10 per cent of its total volume via auction-determined prices and we expect the company to sell about 72mt/76mt/88mt through e-auctions in FY24/FY25/FY26. E-auction premium, which eased in Jul’23 after peaking at 329 per cent in Q2-FY23 (in line with softening international coal prices), has rebounded.
The revival in demand and rise in international prices have pushed the e-auction premium to a level of 80-100 per cent over the last few months.
COAL has intensified its focus on capex which will improve its evacuation infrastructure. Capex, which used to hover around ₹6,500-8,500 crore until FY20, tripled in FY23 to ₹18,600 crore. Over the last three years, capex has exceeded budget estimates.
COAL trades at an EV/Adj. EBITDA of 4.2x FY26. We roll forward our estimates to FY26. We reiterate our Buy rating on the stock with a TP of ₹430. We believe COAL is well placed to capitalise on the growth opportunity ahead.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.