Home/ Markets / Stock Markets/  Coal India shares: 32% upside on cards! Analyst expects strong near-term performance

Domestic brokerage and research firm Motilal Oswal Financial Services expects robust domestic demand, enhanced vision of one billion tonne production, and an improved e auction premium to drive a strong near-term performance for the Coal India stock.

"Coal is trading at 3.6 times our FY24E EV/EBITDA and 1.8 times our FY24E P/B, respectively. We maintain our e-auction premium estimate for FY23 at 231 per cent," said the brokerage while reiterating its 'Buy' rating on Coal India shares with a target price of 275.

With 32 per cent upside potential, state-owned CIL continues to be the brokerage's top pick in the mining sector.

Motilal Oswal believes CIL is well placed to capitalise on the growth opportunity ahead. Any hike in FSA will further add to the financial performance of the company, it said.

CIL looking to hire fresh talent

CIL over the last two to three years has gradually reduced its hiring in the above 50 age group (zero hiring in executive role above 50 years in FY22) and is focusing on hiring and retaining younger generations with fresh talents. “This will help Coal India bring down the wage bill considerably in the next few years," the brokerage said.

Also, almost 50 per cent of the workforce is over 50 years and are due for retirement in the next few years and the younger workforce replacing the outgoing employees will be commanding lower annual packages.

CIL Q4 performance

The brokerage also expects CIL to register a better QoQ performance in the fourth quarter with higher volumes on e-auction and almost similar levels of premium.

Coal India sells 10 per cent of its volumes in e-auction at auction-determined prices and the brokerage expects the company to clock a total volume of 60 million tonne in FY23E.

COAL has declared a second interim dividend of 5.25 per share, thereby, taking the total dividend for FY23 to 20.25. "We have estimated full-year FY23 DPS of 27," the note stated.

Coal India stock has witnessed a 4 per cent decline in the last month. Shares of the state-run miner were trading at 207.85, down 0.29 per cent on NSE in Monday's trade.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Meghna Sen
Business journalist tracking markets, companies, economy and crypto for Livemint. She has 6 years of experience with online and print publications. Email: meghnasen08@gmail.com
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Updated: 27 Mar 2023, 12:10 PM IST
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