Shares of Coal India in intra-day trade on Friday (June 11, 2021) hit a fresh 52-week high of Rs. 165 per share on the NSE, gaining over 5 percent. The gains in the stock price of the state owned entity come on the back of hopes of improved earnings in the near term. The scrip last hit its 52-week high price of Rs. 162.95 on February 26 this year.
Owing to the sharp run up in stock price for the last two weeks, the stock of Coal India in today's trade reclaimed a market cap of Rs. 1 trillion. At the time of writing this copy, the stock trade at Rs. 161 per share on the NSE and commanded a market cap of Rs. 99,158 crore.
Performance of Coal India shares over a time period
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Motilal Oswal's take on the Coal India scrip
In a stock update, analysts at the brokerage firm said, "With a recovery in demand, e-auction premiums and realisations have shown signs of an improvement. We expect this to eventually seep in (given some lag between allocation and dispatches) and improve as inventory levels at Coal's mines reduce. The global thermal coal prices have been on an uptrend, which is encouraging for e-auction realizations".
With improving offtake and realisations, we see sharp operating leverage coming into play. Notwithstanding any further negative shocks, we expect Coal India's profitability to recover sharply in FY22 (+29 per cent YoY). Recovery in demand and funds from the Atmanirbhar scheme should help alleviate concerns on stretched receivables, the brokerage firm added.
Should You Continue To Hold Coal India Shares?
Technically also, the scrip of Coal India has shown trend reversal on chart for the very first time since 2016 (i.e. after a gap of 5 years). Experts are of the view that the stock can very easily hit Rs. 200- 210 in 1.5 to 2 months time, implying an upside of 27%.
Other reasons that advocate holding the scrip of Coal India:
• Highly efficient management with a ROE of 38.9%
• Low debt to equity ratio of -0.41 times
• The stock is in a bullish zone technically. Trend has improved from mildly bullish on June 7. A host of factors for the scrip are bullish, including MACD, KST and Bollinger Band.
• The company has delivered negative results for the last six consecutive quarters
• Institutional holdings remain high in the scrip at 28.4%
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