Coal India’s Stock Price Surges Amid Rising Production and Strong Power Sector Demand

Coal India's Stock Price Surges Amid Rising Production and Strong Power Sector Demand

VoM News Desk | October 17, 2023 | 06:05 PM IST | Breaking News | Follow on Google News

Coal India’s Stock Price Surges Amid Rising Production and Strong Power Sector Demand

Coal India’s Stock Price Surges Amid Rising Production and Strong Power Sector Demand

Coal India’s (CIL) share price has experienced a remarkable uptrend, surging by over 36% since the end of August, reaching a fresh 52-week high. Several factors contribute to this bullish trend, including increased production and supplies by the company, alongside elevated international coal prices that enhance open market supply realizations to the non-power sector. Moreover, Coal India’s high dividend yield is attracting significant investor interest.

Increased Supplies to Power Plants

Coal India recently reported a nearly 6% increase in its supplies to thermal power plants across India during the first half of October 2023, in anticipation of the festive season. The supplies reached 23.5 million tonnes (mt), compared to 22.2 MT during the same period in October 2022. This surge in supply is driven by a growing demand from the power sector, benefiting from strong power demand. In the first half of FY24, Coal India’s production increased by 11.3% year-on-year, totaling 333 MT, with a 8.6% year-on-year growth in total supplies, reaching 360.7 mt.

Growth Prospects and High Dividend Yield

Analysts commend Coal India’s growth, particularly considering the high base. Although the September quarter is seasonally weak due to the impact of rainfall on demand and supplies, the company’s supplies are picking up pace in October. For FY24, Coal India aims to achieve a volume target of 780 mt, with plans to reach 840 mt and 1,000 mt during FY25 and FY26, respectively. The power sector’s strong demand for thermal coal, along with a decrease in hydropower and renewable contributions post-Q2, is expected to boost Coal India’s volume prospects.

Positive Earnings Outlook

The company’s higher production and realizations are likely to support its earnings. Analysts at Nuvama Institutional Equities have raised their FY24 and FY25 estimated EBITDA (earnings before interest, tax, depreciation, and amortization) by 9% and 8%, respectively, factoring in higher e-auction prices and volumes. Furthermore, Coal India’s high dividend yield expectations are another driving force behind its surging share prices. Nuvama has increased its dividend per share estimates, highlighting the potential for an interim dividend per share of ₹30 for FY24, translating into an annualized dividend yield of 21%.

VoM News Desk

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