Brokerage firm, Prabhudas Lilladher has recommended buying the stock of Coal India, as the brokerage estimates that dividend yields can be as high as 12.6%, based on the current market price of Rs 147 in FY 2022-23.
How the dividend for Coal India could pan out (estimates by Prabhudas Lilladher)
|FY 2021-22 (e)||FY 2022-23|
|Dividend per share||Rs 14.4||Rs 18.5|
The dividends are based on the current market price of Rs 147 and in the past, the company has given an even higher dividend than Rs 18.5 estimated for Fy 2022-23. The firm has set a price target of Rs 164 on the stock of Coal India.
Reasons to buy the Coal India stock
According to Prabhudas Lilladher, Coal India delivered marked improvement on three counts in August. Resilient volumes despite lean month, continuous reduction in dues from State power generators and strong E-auction revenues were the highlight of month.
"There are concerns that Coal India's would be under pressure to divert high margin E-auction volumes to power utilities under linkage/Fuel supply agreement (FSA) due to increased power demand and low inventory at power plants. We see no risk to its E-auction volumes as power demand would start receding in October, seasonal increase in Coal India's volume movement and 3) major chunk of auction volumes are already dedicated for power utilities. In light of better operational performance and strong outlook on E-auction realisations, we maintain Accumulate with a target price of Rs 164 based on EV/EBITDA of 3 times FY23e," the brokerage has said.
Coal India performing better on operational front
According to Prabhudas Lilladher, Coal India's offtake grew 9.5% YoY to 48.6mnt in August-21 on a high base of +9.4% with 1.57mnt/day, the fifth consecutive month of best ever seasonally adjusted daily run-rate. As inventory has started building up coupled with steeper rise in production, we believe that Coal India would positively surprise the street on off take supported by strong demand across sectors and lean inventory in the system," the brokerage has said. The shares of Coal India has largely underperformed the Sensex in the last 1-year.
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