Multibagger Coal India share price trades near all time high: Should you Buy, Sell or Hold the stock?

Stock Market Today: Multibagger Coal India share price is trading near all time highs, it scaled on Thursday post Q1 results and also reporting provisional July volume numbers. Coal India share price have risen more than 125% in last one year having given Multibagger returns to investors.

Coal India reported strong Q1 performance with Net profit at ₹10943.55 Crore rising 4% year-on-year and 26.2 % sequentially. The strong demand is driving sales volume and earnings while production growth has been the key in supporting the supplies.

Strong Volume growth

Coal India production for 1QFY25 at 189mt million tonne grew 8% year on year. The sales volume for Coal India volume offtake for 1QFY25 stood at 197mt up 5% year-on-year.

The volume growth continues and July has seen good 2.5% rise despite being seasonally weak and monsoon impacted quarter.. The April-July production at 244 mt is up 6.6% while sales at 257.2mt are up 4.4%.

With a robust volume outlook, healthy e-auction premiums, and lower costs, the outlook for Coal India remains positive, said analysts at Motilal Oswal Financial Services,

Rising Power demand to support growth

Coal India supplies 90% of its volumes to the power sector under the Fuel Supply Agreement (FSA). The rising demand is pushing volumes for Coal India. Peak summer, record-breaking heat waves, and rising peak temperatures, particularly in northern India have led to increasing energy and peak power demand which has resulted in commensurate increase in thermal power generation, said analysts.

Analysts at JM Financial Institutional Securities said that with 27.4 GW of thermal power capacity under construction, 18.8 GW of projects under various stages of tendering, and another 33 GW under planning, they expect the demand for coal for power generation to consistently grow over the next decade.

Higher volumes to support e-auction revenues

The rising production volume is positive for Coal India being able to sell more coal in open market after meeting FSA demand. Though declining international coal prices have meant that premiums may have softened but higher volumes may still support earnings. Taking cues from global markets and domestic demand, e-auction prices for Coal India remains range-bound, between ₹2300-2500 a tonne as per JM Financial analysts . Also current e-auction prices are healthy as per Motilal Oswal analysts.

Analysts upgrade earnings estimates

The MOFSL analysts while largely maintain their Earnings before interest tax depreciation and amortisation (EBITDA) estimates for FY25E and FY26, however, raise net profit estimates for FY25 and FY26 by 11% and 3% respectively, majorly on account of higher than expected OBR (Over Burden removal) reversals. Over burden is rocks and soil that is removed to enhance production and mining activities.

Considering the continued momentum in power demand and focus on thermal capacity additions, JM Financial estimates Coal India to report 839 million tonne and 915MT of production during FY25 and FY26. With consistent growth in production and stabilization in international coal prices, they reiterate their BUY rating on the stock with a target price of ₹601

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions