Coal India hits 52-week high, regains Rs 1 trillion market capitalisation

Shares of Coal India hit a 52-week high of Rs 164.45 as they rallied 5 per cent on the BSE in intra-day trade on Friday amid expectations of improvement in earnings going forward. The stock of the state-owned company surpassed its previous high of Rs 162.95, touched on February 26, 2021.

In the past two weeks, the stock has outperformed the market by gaining 12 per cent as compared to a 2.2 per cent rise in the S&P BSE Sensex. A sharp rally in the stock price has helped Coal India regain the market capitalisation of Rs 1 trillion. At 09:46 am, the stock was up 4 per cent at Rs 163, with a market capitalisation of Rs 1.01 trillion, the BSE data shows.

Coal India reported a strong offtake in dispatches, with volumes at 55.1mt, registering a 37.6 per cent year-on-year (YoY) increase in May 2021. For the first two months of FY22, Coal’s offtake remains higher by 38 per cent YoY at 109.1mt. Offtake growth in May 2021 comes on the back of a 15 per cent rise in coal-based generation (based on initial data from POSOCO) amid a 7 per cent rise in overall power demand, and re-stocking of inventory at power plants (up 5mt MoM).

“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,” analysts at Motilal Oswal Securities said in a stock update.

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 said.

Meanwhile, the board of directors of Coal India is scheduled to meet on Monday, June 14, 2021, to consider, audited financial results of the company for the quarter and year ended March 31, 2021, and also to consider the recommendation of the final dividend for 2020-21 (FY21).