Buy This Maharatna PSU Stock For Target Price Of Rs 275: ICICI Direct

ICICI Direct is bullish on Coal India Ltd. and suggests 'buy' for a target price of Rs 275 apiece. According to the brokerage's estimated target price, the stock is likely to gain 16% in 12 months if the stock is purchased at the current market price. It is a large cap mining sector Maharatna company having a market capitalization of Rs 1,46,426 Crore.

Stock Outlook

The current market price (CMP) of the stock is Rs 237.60 apiece. The 52-week low of the stock is Rs 139.15 apiece recorded on 20 December 2021 and the 52 week high is Rs 240.50 apiece recorded on 08 September 2022, respectively.

Returns on Investment

In the past 1 week, the stock surged 3.62%, whereas, in the past 1 month, it surged 10.31%. In the last 3 months, the stock gave a positive return of 19.55%. Over the past 1 year, it gave a return of 59.84%. In the past 3 years, the stock gave 19.19% positive return and in the past 5 years, it gave 6.82% negative return, respectively.

Key highlights of Q1FY23 Earnings Call

• For FY23, Coal India has maintained its production target of 700 million tonnes (MT). Of the 700 MT target for FY23 the production break-up is ~44% during H1FY23 and ~56% during H2FY23.
• For FY22, the company incurred a capex of Rs15401 crore against the targeted capex of Rs 14685 crore. Capex for Q1FY23 was at Rs 3034 crore. For FY23, Coal India is targeting capex to the tune of Rs 16500 crore.
• The company is aiming to achieve 1 billion tonnes (BT) of coal production by FY26. CIL plans to achieve coal production of ~900 MT by FY25.
• Attrition of manpower: Coal India has guided for ~5% reduction in manpower annually for the next five to 10 years (FY22 base of 248550 employees).
• For FY23, Coal India is targeting sales e-auction sales volume of ~80-90 MT (quarterly run-rate of ~20-25 MT).

Buy for Rs 275 target price

Coal India's share price has given a return of ~58% in the last 12 months (from ~Rs 149 in September 2021 to ~Rs 236 levels in September 2022). "We maintain our BUY rating on the stock. We value Coal India at Rs 275, 4.5x FY24E EV/EBITDA," the brokerage has said.

Key triggers for future price performance

According to the brokerage firm, the key risks are:

• Over FY22-24E, we expect Coal India's consolidated topline to grow at a CAGR of 5.7% while consolidated EBITDA and consolidated PAT are expected to register a CAGR of 14.7% and 14.6%, respectively.
• We expect Coal India to report consolidated EBITDA margins of 30.3% for FY23E and 26.5% for FY24E (22.5% for FY22).

About - Coal India Limited

Coal India is one of the largest coal producers in the world. In FY22, Coal India produced 623 million tonnes (MT) while offtake was at 662 MT.  Coal India has 345 mines (as on April 1, 2021) of which 151 are underground, 172 open cast and 22 mixed mines. Coal India has extensive mining capabilities. It possesses advanced technology in open cast mining.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.