Home / Markets / Stock Markets /  Coal India shares surge to trade near 52-week high. Should you buy?

Shares of Coal India surged more than 4% to 232 apiece, trading near its 52-week high level, on the BSE in Thursday's early trading session. The PSU stock has been in an upward trend since the last few days and has rallied about 9% in five days.

Coal India's production increased to 299.0mn tonne until September FY23 vs 249.8mn tonne for the same period in FY22. Growth in total offtake over April-September FY23 was 8% with the company shoring up supplies to 332.2mn tonne.

Coal India (CIL) has maintained strong operational growth on the back of increased production and higher rake loading, buoyed by high domestic coal demand and continued elevated international coal prices, said brokerage ICICI Securities.

CIL supplied 285.5 mnte of coal to the power sector, comprising 86% of the total offtake, much higher than FY22. Boosted by this, while FSA volumes remain strong, e-auction volumes booked are tepid at 16.6mnte for Apr-August 2022 which it believes may pick up in H2CY22.

“Coal availability is much better compared to last year and we do not expect a repeat of the situation witnessed in Oct’21, when 104 power plants totalling 129GW of capacity breached their critical coal stock levels, and there was substantial disruption in power generation. Increase in production and despatch from October (post the monsoon period) will likely help ease the situation further," the note stated.

The brokerage expects dependence on domestic coal to remain strong and e-auction premiums to remain elevated in FY23, which is likely to result in a better FY23, both in terms of volumes and prices. Additionally, any reduction in diesel prices is expected to help lower costs. It has maintained Buy rating on Coal India shares with a target price of 294 apiece. ICICI Securities' expects Coal India's dividend payout to remain high, leading to 8- 10% yield at CMP, despite heavy capex.

“Coal availability was cause for concern over January-June, but the situation stabilized after the company ramped up production to support power plants," said Elara Capital with an accumulate rating on the stock. It expects Coal India's consolidated reported net profit to rise 80% YoY whereas sees net revenue to rise 13.4%, owing to higher coal offtake and higher eAuction realization.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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