Over 100% return in 6 months! Axis Securities sees Coal India stock at Rs 500; here's why

Shares of Coal India have delivered over 100 per cent return in the past six months. The PSU stock has rallied over 22 per cent in 2024 so far and is up around 120 per cent in the last one year on strong coal demand.

The State-run company posted its results for the third quarter of FY24. Coal India's net profit surged to Rs 9,069 crore in the December quarter from Rs 6,799 crore in the second quarter. The consolidated revenue from operations in October-December increased to Rs 36,153.97 crore from Rs 35,169.33 crore a year ago.

According to Axis Securities, Coal India has demonstrated a good production run rate. It's taking several measures to support its production targets such as 1) using the MDO model (Mine Developer Operators) for greenfield and brownfield mines, 2) FMC (First Mile connectivity) projects for evacuation efficiency, and 3) Using the latest technology for faster evacuation and transport along with focus on exploration.

The brokerage firm values the stock at 5.0x 1-year forward EV/EBITDA multiple on FY26 EBITDA (unchanged). It has arrived at a new target price of Rs 500 per share (from Rs 470 per share).

"As per the National Electricity Plan (NEP) for 2022-32, the domestic coal requirement

is estimated at 866 million tonnes (MT) for FY27 and 1,026 (MT) for FY32. The coal requirement has been worked out assuming a 20 per cent reduction in hydro, nuclear and VRE generation due to uncertainty. Increasing usage of thermal power provides demand visibility for coal in future," Axis Securities said in its recent report.

Notably, analysts largely share a positive view on Coal India stock given the increasing acceptability of coal as a dominant fuel mix and Coal India's solid volume delivery in the past few quarters, in addition to an expected annual dividend pay-out of Rs 20-23 per share, which implies a 7 per cent yield.

About Coal India

Coal India Limited (CIL) is a state-owned coal mining corporation and is the single largest coal producer in the world. It has 322 mines (as of 1st April 2023) of which 138 are underground, 171 opencast, and 13 mixed mines.

It also manages other establishments like workshops, hospitals and functions through its subsidiaries in 83 mining areas over eight states of India.

Coal India on D-Street

Shares of Coal India ended 3.09 per cent higher at Rs 466.40 on BSE on Wednesday. The stock hit its 52-week high of Rs 468.50 on February 08, 2024, and a 52-week low of Rs 207.70 on March 27, 2023.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)

Also read: MRPL shares jump 18% to hit one-year high; time to book profit or more upside possible?

Also read: Stock recommendations by analyst for February 15: GAIL, PNB and Axis Bank