Nuvama views Coal India stock at Rs 361, dividend yield at 9%, 14% below 52-week high.

Coal India: Investors look at e-auction prices to figure out how profitable Coal India is, but Nuvama pointed out that a few charges Coal India makes, along with cleaned coal and other services, also make a big difference in its profits.

Shares of Coal India are down 14% from their 52-week high of Rs 263.30 in November of last year. This is because investors are worried about the government’s recent share loss and the prices of e-auction have dropped sharply. Nuvama Institutional Equities, on the other hand, thinks that e-auction prices can’t go down too much because Coal India’s prices are still lower than world prices.

“During FY18-22, CIL had an average Ebitda of Rs 25,100 crore.” “We believe Coal India will continue to generate much above-average Ebitda in the foreseeable future,” the brokerage stated, citing increased volume, a partial FSA price hike, and cost peaking. The company thinks that Coal India Nuvama also said that Coal India should keep giving out dividends of at least Rs 20 per share in FY24E and FY25. This would mean a nice dividend return of 9%.

The local brokerage said that bad things like rising staff costs and the government’s plan to sell it are in the past and that the stock’s risk-reward ratio is good.

Investors always look at e-auction prices to figure out how profitable Coal India is, but Nuvama pointed out that a few fees (such as evacuation fees, surface transportation fees, forest transit fees, etc.) that Coal India charges for washed coal and other services also make a big difference in its profits.

According to Nuvama’s calculations, “others” accounts for 37% of FY23 Ebitda (a 19% CAGR from FY18 to FY23), and its contribution should rise to 45% in FY25E as e-auction earnings decline. By mid-June, the average e-auction premium was 55% over the FSA price, down from 137% in April. It sees average e-auction profit in June quarter at 103 per cent.

The premium is anticipated to stabilise throughout the monsoon before increasing in H2FY24. We think that thermal power output will rise by 4–5% YoY in the months after the summer. This will cause Coal India to increase its supply to the power sector, which will help keep e-auction prices steady. For FY24E, we are lowering the average e-auction coal price from Rs 3,000 per tonne to Rs 2,700 per tonne. For FY25E, we are keeping it at Rs 2,035 per tonne. It said that a change of Rs 100 per tonne in the e-auction coal price would change FY24E Ebitda by 2%.



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