Coal India Shares May Rise Up To 27% After Recent Correction, Says Jefferies
Last Updated: March 14, 2024, 12:56 IST
Coal India Ltd gained 2.01 per cent today to trade at Rs 425.3. The S&P BSE Metal index is up 0.06 per cent to quote at 26366.56. The index is down 0.91 per cent over last one month. International brokerage Jefferies said that the recent slump in Coal India shares throws up a good opportunity for investors to buy into the state-run miner, Jefferies said in a note.
The international brokerage maintained its ‘buy’ call on Coal India, with a target price of Rs 530 per share. From the closing price of Rs 416.9 on the BSE, this implies an upside of 27 per cent.
Coal India Ltd has lost 5.99 per cent over the last month compared to 0.91 per cent fall in S&P BSE Metal index and 1.42 per cent rise in the SENSEX.
The 13 per cent decline from its peak has made Coal India shares attractive to the broker. Jefferies noted that the coal miner’s stock was trading at a steep 57 per cent discount to the Nifty 50 PE. From 2011 to 2018, Coal India usually traded at an average discount of around 16 per cent.
Coal India’s recent volume growth trajectory has seen an improvement and is better suited to feed India’s rising power demand. The fall in e-auction prices too seems largely behind.
On February 19, the Coal India management told analysts that its e-auction premiums had dropped to 48-50 per cent in January 2024 and 38 per cent in February 2024. On the other hand, volumes had increased 17 per cent and stood at 13 per cent of sales.
Coal India set a target to produce 838 million tonnes (MT) of coal in the financial year 2024-25, of which 661 MT will be supplied to the power sector alone, the state-owned company’s chairman and managing director (CMD) PM Prasad said.
“Earlier, the target for Coal India was 850 MT. But currently, there are huge coal stocks at thermal power plants (TPPs) because of this the ministry has revised our production target to 838 MT for FY25. That said, if the power demand increases substantially, Coal India will still be in a good position to produce more than the said target,” added Prasad.
Shares of Coal India declined 7 per cent on Wednesday, in line with the broader market sell-off. The stock is down 10.5 per cent over the last one month.
