Coal India: On a conservative volume and pricing estimates, Antique Stock Broking expects Coal India to clock 9 per cent and 16 per cent CAGR in revenue and Ebitda by FY22–25E Coal India Ltd's ongoing offer for sale (OFS) would open for retail investors today, with an offer size of 9,244,093 shares. The two-day issue received a solid response from non-retail investors on Day 1, receiving bids for 287,624,993 shares, up 3.46 times against an offer size of 83,196,831 shares. Analyst are largely positive on Coal India’s prospects, though they remained a bit concerned over falling e-auction premiums. Their targets for Coal India suggests up to 58 per cent upside potential over the OFS floor price of Rs 225 a piece.
In a note on Friday morning, Antique Stock Broking said Coal India estimates a capex of Rs 60,000 crore over the next four years as it plans to achieve 1 btpa target.
"Even then, on a conservative volume/pricing estimate, we expect the company to clock 9 per cent and 16 per cent CAGR in revenue and Ebitda by FY22–25E. Using DCF, we value Coal India at Rs 280 per share, and retain Buy recommendation," the brokerage said.
In the two-day OFS, the government is selling over 18.48 crore shares, or 3 per cent stake, in the PSU coal producer. The sale includes a green-shoe option of 1.5 per cent in case of over subscription.
Antique's stock price target on the stock suggest a 24 per cent potential upside on Coal India over the OFS floor price.
Analysts said Coal India's recent decision to increase prices for its high grade (G2 to G10) non-coking coal by 8 per cent with effect from May 31 was positive. This was the first such price hike by Coal India since 2018. While analysts do not see more such increases in the near term, considering the inflationary environment and upcoming elections, their price targets on the stock suggest upside ahead for the stock.
Motilal Oswal Securities sees the stock at Rs 290. This brokerage has increased its revenue estimates for Coal India by 2 per cent to factor in the incremental revenues due to the price hike.
"The e-auction premiums have drastically come off in April and May and the near-term outlook on premiums remain soft. We have increased our Ebitda/adjusted PAT estimate by 2.4-2.5 per cent to factor in the price hike benefit, which would be partially offset by the lower e-auction premiums," it said adding that Coal India is well placed to capitalize on the growth opportunity ahead.
Nuvama projects a dividend per share of Rs 20 each for FY24 and FY25, with a dividend yield of 8 per cent. It said the Coal India stock trades at a cheap valuation, as it revised its target price to Rs 365 from Rs 362.
Kotak, meanwhile, suggested a target of Rs 240 on the stock.
At the indicative price of Rs 226.12 a share, the bids by institutional buyers were worth Rs 6,500 crore. Coal India is looking to sell 3 per cent stake worth Rs 4,000 crore.
Antique said non-seasonal rains impacted power demand in April and in the first half of May. But since then, with heat waves, peak power demand was recorded at 221.34 GW on May 23, which was at an all-time high and the highest supply in a day in FY24. Coal stocks continue to be manageable, Antique Stock Broking said.