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The shares of Coal India (CIL) dipped 5% to Rs 360, their lowest level since May 20, 2015 on the BSE, after the company said that its average realisation from e-auction of coal dropped to Rs 2,184 per tonne in the June quarter from Rs 2,450 per tonne for full financial year 2014-15. The e-auction average realisation figures for June quarter 2014 were not available.
“Coal prices in E-auction are trending down on improved domestic supply and weakening of import prices. Coal prices were close to floor in the July auction as CIL tried to push more volumes during lean demand periods,” according to Sanjay Jain & Dhruv Muchhal, analysts at Motilal Oswal Research.
But the analysts have maintained a ‘Buy’ rating on the stock, with a target price of Rs 450 per share. “Slower-than-expected industrial activities are a temporary setback for coal demand. However, we believe CIL’s prices are more competitive for sponge iron producers compared with that of imported coal. As the industrial activity picks up, CIL is likely to command a price equivalent to that of imported coal parity—adjusted for grade because of advantage of proximity,” analysts said in a report dated August 10, 2015.
However, Religare Institutional Research has maintained a ‘Hold’ rating on the stock, on expectations of low profitability in Q2 (July-September) due to lower e-auction premiums and low operating leverage.
Meanwhile, in the past two weeks, the stock has underperformed the market by falling nearly 19% from Rs 443 on August 8, compared to a 1% decline in the S&P BSE Sensex.
At 01:24 PM, the stock was down 4.2% at Rs 364 on the BSE. A combined 5.44 million shares changed hands on the counter on the BSE and NSE.
“Coal prices in E-auction are trending down on improved domestic supply and weakening of import prices. Coal prices were close to floor in the July auction as CIL tried to push more volumes during lean demand periods,” according to Sanjay Jain & Dhruv Muchhal, analysts at Motilal Oswal Research.
But the analysts have maintained a ‘Buy’ rating on the stock, with a target price of Rs 450 per share. “Slower-than-expected industrial activities are a temporary setback for coal demand. However, we believe CIL’s prices are more competitive for sponge iron producers compared with that of imported coal. As the industrial activity picks up, CIL is likely to command a price equivalent to that of imported coal parity—adjusted for grade because of advantage of proximity,” analysts said in a report dated August 10, 2015.
However, Religare Institutional Research has maintained a ‘Hold’ rating on the stock, on expectations of low profitability in Q2 (July-September) due to lower e-auction premiums and low operating leverage.
Meanwhile, in the past two weeks, the stock has underperformed the market by falling nearly 19% from Rs 443 on August 8, compared to a 1% decline in the S&P BSE Sensex.
At 01:24 PM, the stock was down 4.2% at Rs 364 on the BSE. A combined 5.44 million shares changed hands on the counter on the BSE and NSE.
