Coal India hits 52-week high; stock rallies 27% in one month

Shares of Coal India hit a 52-week high of Rs 170, up 5 per cent on the BSE in Thursday’s intra-day trade on improved outlook. The stock of the country’s largest coal producer surpassed its previous high of Rs 164.90 touched on June 11, 2021. In the past one month, the stock has rallied 27 per cent, as compared to a 7 per cent rise in the S&P BSE Sensex.

India's coal mining sector is dominated by Coal India and the scenario is unlikely to change in the immediate future. Even after the opening up of the coal sector to private commercial mining by the government of India, the proportion of coal supply from Coal India is likely to dominate the Indian market.

Based on the demand projection in ‘Vision 2024’ for the coal sector in the country and subsequent demand projection on Coal India, a roadmap has been prepared to project production plan in the 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 company said in the financial year 2020-21 annual report.

Coal India’s April-June quarter (Q1FY22) result highlights the benefit of a recovery in power demand, leading to improved offtake and profits. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) (excluding overburden removal or OBR) jumped 64 per cent year-on-year (YoY) to Rs 4,600 crore.

Motilal Oswal Financial Services expects Coal India’s profitability to recover in FY22E (+24 per cent YoY). "Capex run-rate is likely to increase in the near term, but higher dispatches and some normalization in receivables should aid cash generation and maintain dividends. Demand has been improving with Coal India reporting a 33 per cent YoY increase in offtake for Q1FY22. With improving offtake and realizations, we see operating leverage coming into play in FY22," the brokerage firm said in the result update.