'Expect 10% dividend yield, strong earnings': Motilal Oswal raises target price of this PSU stock
1 min read 01 Sep 2022, 01:41 PM ISTMotilal Oswal has increased the PSU stock's target price to ₹290 per share (from ₹275 earlier)
PremiumDomestic brokerage and research firm Motilal Oswal expects global coal demand to remain strong in the near term as the world recovers from the pandemic and Europe shifts to renewables (in the long term) from Russian gas, increasing dependency on coal in near term.
"India’s coal consumption is likely to increase and so will its thermal coal imports in the near term. As Europe continues to buy more South African coal, we believe portbased power plants in India will remain shut or operate at a lower rate, putting pressure on domestic coal-based power plants to ramp up generation. This, in turn, will fuel demand for domestic coal," the note stated.
Motilal Oswal expects FY23 e-auction premiums to remain in triple digits at least as coal availability for e-auction has reduced drastically with most of the coal being diverted to the power sector, e-auction reforms have brought all non-FSA buyers at one platform thereby increasing competition, and rising price of South African coal will prompt domestic consumers of South African coal to shift to domestic coal.
“Coal India trades at 3.0x/4.3x our FY23/24E EV/Adj. EBITDA. We expect a 10% dividend yield at CMP (current market price), as we forecast strong earnings to result in healthy dividends going forward," said the brokerage while maintaining its Buy rating on Coal India shares and increased its target price to ₹290 apiece (from ₹275).
A dividend means the distribution of surplus from the profits by a listed company to its shareholders. Coal India has been returning cash to shareholders through interim and final dividends for quarters or year-end. In the past 12 months, Coal India Ltd (CIL) as declared an equity dividend amounting to ₹20.50 per share. At the current share price of ₹230, this results in a dividend yield of 8.88%, as per data by Trendlyne.
State owned coal mining corporate Coal India is the largest coal producer in the world. The PSU stock is up more than 48% in 2022 so far.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
