Coal India can be a Good for Long-Term
Coal India is the largest coal producer in the world. It is a significant cog in the wheel to keep
India’s power plants and factories running. The primary consumers of the company are the
power and steel sectors. Besidescement, fertilisers, and brick kilns also buy coal from the
company. As of April 1, 2021.
The period the latest data is available, the company had 345 mines,
of which 151 were underground, 172 were open cast, and 22 were mixed mines.
The company has extensive mining capabilities. It has advanced technology in open cast mining.
Coal India produced 623 million tonnes of coal, while offtake for FY22 was at 662
MT. As power consumption has surged in the country, especially after the pandemic, the demand
for coal increased.
Moreover, the prices in the international market also shot up. This has led to
an improvement in the outlook of the company. Thus, the Coal India share has price seen buying
Booming coal prices were also reflected in its quarterly earnings performance. For the quarter
ended March 2022, Coal India reported consolidated revenue of Rs. 32,707 crores, up22% YoY
and 15%QoQ. This was also higher than ICICIdiret’sestimate of Rs.31,080 crore. The company
said its consolidated net profit for the quarter was Rs. 6,715 crores, up 46% YoY and 47%QoQ.
This was higher than ICICIdirect’s estimate of Rs. 6,020 crore.
So, does this mean Coal India share price is attractive enough for you to buy? Going by
ICICIdirect’s recommendation, the answer is yes. The broker underlined Coal India’s price had
given a return of 26% in the last 12 months (from Rs. 148 in May 2021 to Rs. 187 levels in May
2022). It maintained its BUY rating on the stock.
ICICIdirect values the stock at Rs. 225, 4.5 times FY24 estimated enterprise value divided by
earnings before interest, taxes, depreciation, and amortization. Analysts at the brokerage firm
believe the key triggers for future performance will be:
-Over FY22-24, it expects coal India’s consolidated topline to grow at a compound annual
growth rate of3.2%, while consolidated EBITDA and consolidated net profit are expected
to register a CAGR of 6.3% and 5.6%, respectively.
-We expect the company’s consolidated EBITDA margins to hover at 24% for the next two years
(24% for FY23 and 23.9% in FY24).
-It models coal production of 685 MT for FY23 and 715 MT for FY24. Additionally, it models a
coal offtake of 675 MT for FY23 and 700 MT for FY24.
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