Shares of Coal India hit a two-and-half-month high on Thursday, even as the coal major said it had missed its production target.
The company, in a late Wednesday disclosure, said it has achieved a production of 42.58 million tonnes in May, lower than the target of 44.64 million tonnes for the month.
Shares of CIL surged about 3.5 per cent at ₹307.35 on the NSE. Last time the stock ruled above the ₹300-mark on the BSE was on March 11.
During the months of April and May, CIL generated 82.93 mt of coal against the target of 89.12 mt (provisional).
Analysts view this as a positive, as they had feared that oversupply in the market may threaten Coal India’s pricing power.
Besides, the recent fuel supply agreement and marginal increase in price have also boosted the sentiment for the stock.
According to Centrum Broking, “CIL announced a much needed FSA coal price rationalisation which, in our view, would boost the volumes and earnings and nullify the impact of upcoming wage hikes.”
“We expect sustainable re-rating for CIL going ahead, led by i) timely rationalisation of FSA coal prices which should help increase higher grade volumes; ii) start of auction of linkages for non-regulated sector coupled with increasing e-auction sales; and iii) better wagon availability and completion of new railway links to ensure strong volume growth,” Centrum Broking, which retained a buy rating with a price target of ₹400, said.
In April and May, the coal offtake stood at 88.23 mt as against the target of 102.36 mt.
Coal India which accounts for over 80 per cent of the domestic coal production has a target of achieving 1 billion tonnes by 2020.
Auction window boostKamlesh Bagmar and Ankit Shah, analysts at Prabhudas Lilladher, after attending an analyst meet of CIL, said: “We came back positive due to the aggressive focus on volumes through special auction window. In that direction, it will auction 8 mt of additional coal/month under this window to cater to stranded power plants not having FSAs/PPAs at rationalised rates.”
For Emkay Global Services, the price hike is a major sentimental positive. “We believe, grade rationalisation-related benefits to keep coming in. Volume will grow with better power generation growth. We maintain buy on the stock with a target price of ₹384,” it added.
State-owned CIL has reported a marginal rise in consolidated net profit at ₹4,247.93 crore for the fourth quarter ended March 31, 2015-16, against ₹4,238.55 crore reported for a year ago.
The company’s total income decreased to ₹22,898.79 crore (₹23,065.65 crore).