Stocks to Buy Today: On 22 September 2023, the financial services firm Sharekhan published the latest research report on Coal India shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
Sharekhan is Bullish on Coal India and has recommended a ‘buy’ rating on the stock with a target price of Rs 330. Let’s take a closer look at their recommendations for the Coal India share price target set by Sharekhan.
Coal India Limited (CIL) seems to be scaling new heights as it is on course to achieve its fiscal year 2024 (FY24) production guidance of 780 million tonnes. This target implies a year-on-year growth of 11%. In a recent research report by Sharekhan, the analytics firm outlined the key drivers behind CIL’s buoyant performance and sustained growth.
To put things into perspective, CIL is not just stopping at the FY24 target. The company has further ambitious plans to reach 850 million tonnes and 1000 million tonne coal production targets for fiscal years 2025 and 2026 respectively. The coal offtake, another vital metric, grew by 8% year-on-year to 306 million tonnes in the first five months of FY2024 (5MFY2024) and is likely to register more than 7% coal offtake growth for the full year.
Sharekhan’s report lays out the levers that are instrumental for CIL’s strong margin sustainability. These are
- increasing volume from the non-power sector (NPS), which commands better realisation rates,
- benefitting from operating leverage due to strong coal offtake outlook, and
- the potential hike in Fuel Supply Agreement (FSA) coal realisation.
In response to these positive metrics and potential, Sharekhan has revised its earnings estimate for CIL for FY24 and FY25 upward by 7% each. The increase accounts for a higher volume of coal, an improved volume mix skewed towards the NPS, and better absorption of fixed costs due to the benefits of operating leverage. The report suggests that any further hike in FSA coal prices could result in an even more positive earnings scenario for CIL.
But what makes the CIL stock even more compelling? According to the report, the company’s valuation at 6.4 times its estimated FY25 earnings per share (EPS) is attractive. On top of that, the stock offers a high dividend yield ranging between 8-9%. Sharekhan maintains a Buy rating on the stock with a revised price target (PT) of Rs. 330.
One of the crucial developments is the company board’s in-principle approval for the divestment of a 25% stake in Bharat Coking Coal Limited (BCCL). The stake sale, along with its potential subsequent listing, could unlock further value for the company.
|Market Cap||Rs. 1,74,652 crore|
|52-Week High/Low||Rs. 288 (High) / Rs. 208 (Low)|
|NSE Volume (Shares)||93.3 lakh|
|Free Float (Shares)||227.2 crore|
|FII (Foreign Institutional Investors)||9.3|
|DII (Domestic Institutional Investors)||22.3|
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