Shares of Coal India Ltd (CIL) gained over five percent to hit their 52-week high on Friday as investors turned bullish on improving demand, rise in prices, and expectations of growth recovery. The rally in the CIL share price also helped the public sector undertaking regain the market capitalisation of Rs one lakh crore.
The CIL stock price rose as much as 5.3 percent to its 52-week high of Rs 164.90 per share on the BSE. This year so far, the stock has gained around 20 percent.
Global brokerage house JPMorgan also maintained an overweight stance on Coal India with a target price of Rs 200. A worldwide surge in coal prices, according to the brokerage, should drive e-auction prices and earnings as well. Coal India prices should benefit from the fact that Newcastle coal prices are at an eight-year high.
The firm recently announced that its e-auction sales registered a growth of 52.5 percent at 21.5 million tonnes (MT) in the first two months of FY22 signalling a rise in demand. It added that the total allocated quantity till May 2021 was moved up to 21.5 MT, under the five auction windows.
With the demand for coal gathering steam, CIL could garner 16 percent add-on over the notified price during April-May compared to seven percent of the same period last financial year, the firm said.
It also said that the upward trend in the allocation was primarily driven by the non-power sector which evinced a healthy appetite for the dry fuel and accounted for 50 percent of the total booked quantity of 21.5 MT.
“With a recovery in demand, e-auction premiums and realisations have shown signs of improvement. We expect this to eventually seep in (given some lag between allocation and dispatches) and improve as inventory levels at Coal’s mines reduce. The global thermal coal prices have been on an uptrend, which is encouraging for e-auction realisations,” domestic brokerage Motilal Oswal Securities (MOSL) said in a report.
MOSL sees sharp operating leverage coming into play on the back of improving offtake and realisations. Notwithstanding any further negative shocks, it expects Coal India’s profitability to recover sharply in FY22.
Coal India, incorporated in the year 1973, is a large-cap company operating in the mining sector.
Promoters held a 66.1 percent stake in the company as of March 31, 2021, while FIIs held 6.5 percent, DIIs 21.9 percent and public and others 5.5 percent.
The board of directors of Coal India is scheduled to meet on Monday, June 14, 2021, to consider financial results for the quarter and year ended March 31, 2021. The Board will also look at the recommendation for the final dividend for 2020-21 (FY21).
(Edited by: By Ajay Vaishnav)