Coal India Ltd. share price target

We maintain our BUY rating on the stock.

Despite the impressive run-up (~37% in the past 3months), we believe that there is still room for a 25% upside for CIL’s stock price performance. Key points: 1) Production volume likely to be aided by SECL. 2) Demand from power sector likely to stay firm. 3) Record imports by China, amidst looming winter-heating season, likely to aid e-auction prices. 4) E-auction volumes and linkage materialisation to stay elevated, aiding profitability.

Coal India’s (CIL) Aug’23 operating numbers were robust. Key points: 1) production/sales volume continued at the highest-ever level for the fifth successive month in FY24; 2) SECL’s volume revival has offset the flat volumes from MCL; 3) the traditional volume trough in Q2 is far lower in FY24 owing to increased rake availability; 4) higher volume to non-regulated sector (NRS), up 61% YoY in Aug’23, is likely to maintain FSA prices.

Coal India’s (CIL) Q1FY24 EPS of INR 12.9 was 24% and 21% ahead of our and consensus’ estimates, respectively. Key points: 1) FSA realisation was aided by higher supplies to non-regulated sector (NRS); 2) e-auction premium over FSA prices was 144%; and 3) provision of INR 8bn towards wage revision was recognised in Q1FY24.

We expect e-auction volumes to rise which could partially compensate for the falling e-auction premiums. We maintain our BUY rating on the stock.