Coal India surges 5%, trades near 52-week high on price hike report

Shares of Coal India gained 5 per cent at Rs 161.90 on the BSE in the intra-day trade on Wednesday, having gained 9 per cent in the past three trading days, on report that the company might raise prices of the dry fuel by at least 10-11 per cent to mitigate the impact of increased costs and an impending wage revision.

The stock of the state-owned coal mining company was trading close to its 52-week high level of Rs 164.90, touched on June 11, 2021.

In the past one week, Coal India has outperformed the market by gaining 13 per cent as compared to a 6 per cent rise in the S&P BSE Sensex. An upward movement in stock price of Coal India has helped the company regain Rs 1-trillion market capitalisation today. At 02:25 pm, the stock traded 4.4 per cent higher at Rs 161.50, with a market capitalisation of Rs 1.002 trillion, BSE data shows.

According to a PTI report, Coal India has informally discussed the matter with board members and most of them have acknowledged the need to hike prices of coal. The miner is awaiting the government's nod following which it will take the final call. CLICK HERE FOR FULL REPORT

Coal India delivered marked improvement on three counts in August. Resilient volumes despite lean month, continuous reduction in dues from State power generators and strong E-auction revenues were the highlight of month.

There are concerns that coal would be under pressure to divert high margin E-auction volumes to power utilities under linkage/Fuel supply agreement (FSA) due to increased power demand and low inventory at power plants.

However, analysts at Prabhudas Lilladher see no risk to its E-auction volumes as power demand would start receding in October, seasonal increase in COAL’s volume movement and major chunk of auction volumes are already dedicated for power utilities. "In light of better operational performance and strong outlook on E-auction realizations," the brokerage firm said. It maintains an 'accumulate' rating on Coal India with a target price of Rs 164 per share.

For FY22E, Coal India has given production target of ~630-640 MT and offtake target is ~710-720 MT. Emphasis on digitisation of mines for increasing efficiency in overall capacity utilisation resulting in higher volumes of coal at lower cost.

“The company’s is working towards closure of unviable mines. The company’s underground mines employ around 43 per cent of the workforce whereas they contribute 5 per cent of total production. Action is being taken to close the unviable mines of Coal India in a phased manner. Production from 12 such underground mines has already being suspended”, ICICI Securities said in a stock update.

Based on the demand projection in ‘Vision 2024’ for coal sector in the country and subsequent demand projection on Coal India, a roadmap has been prepared to project production plan in medium term wherein Coal India has envisaged 1 Billion Tonne (Bt) coal production in the year 2023-24 to meet the coal demand of the country.

"To achieve this target, Coal India has identified major projects and assessed their related issues. The capital expenditure for the year 2021-22 has been set at Rs 17,000 crore. Further, as per the investment plan, Coal India has planned to invest substantial amount in diversification projects viz. Solar Power, Thermal Power Plant, Revival of Fertilizer Plants, Surface Coal Gasification (SCG), CBM, Rail Wagon procurement etc. during 2021-22," the company said in FY21 annual report.