The financial services firm Motilal Oswal published the latest research report on Coal India Share Price Target, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
Motilal Oswal is Bullish on Coal India and has recommended a “Buy” rating with a share price target (TP) of INR 430, marking an 18% increase from its current market price (CMP) of INR 366. Let’s take a closer look at their recommendations for the Coal India Share Price Target set by Motilal Oswal.
Coal India’s strategic focus on volume growth is central to its positive trajectory. With the Indian government’s push for a reliable 24×7 electricity supply, Coal India has stepped up, committing to long-term Fuel Supply Agreements (FSAs). The company is ambitiously targeting production of 780 million tonnes (mt) in FY24 and 850 mt in FY25.
These figures, slightly higher than Motilal Oswal Financial Services Ltd.’s (MOFSL) estimates, demonstrate the company’s confidence in meeting the rising coal demand, particularly in the power sector.
E-Auction Dynamics and Capex
A significant contributor to Coal India’s robust performance is the e-auction mechanism, where approximately 10% of its total volume is sold at auction-determined prices. The e-auction premium, which had softened in mid-2023, has rebounded strongly in recent months due to a surge in international prices and heightened demand. This trend is expected to continue, bolstering the company’s financials.
Parallelly, Coal India’s intensified focus on capital expenditure (capex) is set to fortify its infrastructure capabilities. The company has tripled its capex since FY20, reaching INR 186 billion in FY23, with plans to exceed the budgeted target of INR 165 billion in FY24. This investment will enhance various aspects of its operations, including railway corridors, land acquisitions, and coal handling plants.
Stable Volumes and Cost-Efficiency
Coal India’s strategy of stable volume growth coupled with cost-control initiatives positions it favourably in the market. The company’s decision to phase out unviable mines and reduce employee strength significantly contributes to its efficiency and profitability.
The continued reliance on thermal power plants in India underscores Coal India’s growth prospects. Despite the rise in renewable energy sources, thermal plants remain pivotal, accounting for over 80% of power generation.
The Ministry of Power’s ambitious target of 1,750 billion units (bu) of electricity generation in FY24, with thermal power contributing over 75%, ensures a stable demand for Coal India’s products.
Coal India’s strategic initiatives and prevailing market dynamics create a favourable environment for its growth. Motilal Oswal’s bullish stance on the stock, with a target price of INR 430, reflects confidence in the company’s ability to capitalize on these opportunities.
- CMP — Rs. 366
- Target — Rs. 430 (+18%)
- Type — Buy
- Date — 28 December 2023
- Report — Read Full Report
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