Coal India surges 32% in 4 days on improved outlook; stock nears 52-wk high

Shares of Coal India (CIL) surged 7 per cent to Rs 198 on the BSE in Thursday’s intra-day trade. The stock has rallied 32 per cent in last four trading sessions on improved outlook amid rising commodity prices. The stock of state-owned company now traded close to its 52-week high of Rs 203.85 registered on October 6, 2021.

At 10:30 am; the stock pared some of the gains, and traded 2.7 per cent higher at Rs 190 on back of heavy volumes. In comparison, the S&P BSE Sensex was up 0.1 per cent at 55,515. The trading volumes at the counter jumped considerably with a combined 33 million equity shares changing hands on the NSE and BSE so far in trades.

European coal surged to historic highs as sanctions against Russia for its assault on Ukraine tightened the global market supply. Benchmark thermal coal in Asia, the largest market for the fuel, soared 46 per cent to a record as concerns about disruption to supplies from Russia turbocharged concerns over tight energy markets, Bloomberg reported.

Futures for high-quality thermal coal loaded on ships at Newcastle port in Australia jumped to $446 a tonne on Wednesday, adding $140.55 in a single day and rising to the highest in data back to 2008, according to ICE Futures Europe.

For October-December quarter (Q3FY22), CIL delivered a strong performance despite facing hurdles such as heavy rainfall and the pandemic which affected physical performance. Coal prices are ruling very high globally, and this effect showed up in e-auctions, where prices were at 100 per cent premium to the agreed Fuel Supply Agreements (FSA).

Motilal Oswal Financial Services (MOSL) expects profitability to recover further in January-March quarter (Q4FY22) led by strong e-auction premiums, which breached the 100 per cent mark after 12 quarters in Jan-Feb. The company is a key beneficiary of the ongoing supply shortage in the global coal market, which is impacting importers in India, the brokerage firm said in Q3 result update.

The management continued its thrust on improving productivity and on closing mines that are loss-making and where there is no option but to raise production to make the same viable. Production at 13 mines has been suspended in the last two years. The incremental manpower requirement for enhancing coal output is being addressed through the Mine Developer and Operator (MDO) route, MOSL said with ‘buy’ rating on the stock and target price of Rs 217 per share.

Technical View 

Upside Potential: 7.4%

Support: Rs 184-182

Following yesterday's fresh breakout CIL this morning surged another 8 per cent in early deals. Some profit-taking thereafter has seen the stock trim gains to Rs 190-odd levels. The stock, however, continues to trade with a firm bullish bias as per the daily and the weekly charts.

As per the daily charts, the near term outlook is likely to remain extremely bullish as long as the stock trades above Rs 184-odd levels (higher-end of the Bollinger Band on the daily charts). Simiarly, the stock has broken out of the higher-end of the Bollinger Band on the weekly charts, indicating a bullish bias as long as the stock sustains above 182-odd levels.

Given the positive under-current, the stock may aim to re-test its 52-week high at Rs 203.80, above which the next hurdle could be around Rs 211.

(With inputs from Rex Cano)