The share price of this power stock engaged in mining and production of Coal and also operates Coal washeries surged 3 percent on Wednesday after reputed brokerage firm Morgan Stanley set a target price indicating potential growth.
Price Action
With a market capitalization of Rs.2.55 lakh crore, Coal India Ltd’s share price closed at Rs.421.00 per share on Wednesday, rising 1 percent from its previous close of Rs.411.50 per share. The shares have retreated since then and currently trading at Rs.413.85 per share. Coal India is a high dividend-paying stock with a dividend yield of 6.34.
What Happened
Morgan Stanley has initiated coverage on Coal India Ltd. with an “overweight” rating and a target price of Rs.525, indicating a potential upside of 32 percent from Tuesday’s closing price.
The firm highlighted that India’s strong power demand outlook should drive Coal India’s volume growth and earnings in the coming years, with volumes expected to be a key earnings driver. Morgan Stanley anticipates that stable realizations, supported by higher fuel supply agreement (FSA) prices, will offset any decline in e-auction premiums.
The brokerage projects Coal India’s consolidated EBITDA to grow at a 7 percent CAGR over the next three years, aligning with its volume growth trajectory. Despite some downgrades following its September quarter results, consensus estimates for FY 2026-2027 have increased by 45 percent to 65 percent over the last year.
Morgan Stanley also expects Coal India to generate strong cash flow in the coming years, maintaining a healthy cash balance despite high capital expenditures and dividend payouts, which could lead to a re-rating of the stock.
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Future Outlook
Coal India Limited (CIL) has set a target to increase coal production to 1 billion tonnes by FY 2026-27, up from 773.647 million tonnes in FY 2023-24, reflecting a 10 percent year-on-year growth. The company plans to allocate Rs.15,500 crores in capital expenditure for FY 2024-25, with a focus on expanding into solar power and coal gasification.
Financial Performance
As per its latest financial results, the company recorded consolidated revenue of Rs.30,673 crore, reflecting a 6 percent decrease YoY. Net profits also saw a 22 percent decline, totaling Rs.6,275 crore during the same period.
The company has shown remarkable growth in liquidity and earnings ratios. Its price-to-earnings ratio stands at 7.02, significantly lower than the industry average of 19.0. The company showcases a strong current ratio of 1.81 and a debt-to-equity ratio of 0.08, reflecting solid liquidity.
In terms of return ratios, the Return on Capital Employed (ROCE) and Return on Equity (ROE) stand at 63.6 percent and 52.0 percent, respectively.
Company Overview
Coal India Limited (CIL) is a state-owned coal mining corporation established in 1975, and headquartered in Kolkata, India. It is recognized as the largest coal producer globally, operating across eight Indian states with a total of 322 mines, including 138 underground and 171 opencast mines
Written by – Siddesh S Raskar
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