Coal India Q4 Flop, But COALINDIA Stock Price Soars on Broker Buy Rating

Coal India Limited (CIL) share price gained over 2% on May 3 even as the company's earnings for the quarter ended March 2024 missed Street estimates. Despite the disappointing earnings, brokerages maintained 'buy' rating on the stock as they believe that coal remains the dominant fuel in the foreseeable future even as the world is trying to switch to renewable energy.

However, target prices were cut on concerns around declining premiums.

In Q4FY24, Coal India's net profit rose 26% YoY to Rs 8,640.5 crore due to cost efficiency and benefits from changes in accounting for stripping activities for open-cast mining. The state-run miner's revenue from operations rose 2% to Rs 37,410.4 crore.

With Coal India's premiums sustaining at around 65% levels, analysts at Emkay expect concerns around declining premiums alleviating to some extent, see potential for upgrades to consensus earnings.

"We maintain our estimates for now, as we sense that the market would seek more clarity on accounting treatment from the management," said Emkay as it maintained 'buy' rating on the stock with a target price of Rs 550 per share.

Amid disruption in supply of natural gas from Russia; the demand has shifted to coal as an alternative. Domestically, power demand is on the rise due to increased industrial activities, noted Nuvama. The brokerage expects Coal India's volume to increase at 5% CAGR of over FY24-26 to 831 mt.

"CIL is on its way to increasing its production and evacuation facilities to 1 bn tonnes by FY28. On account of sustained high coal demand, E-auction prices are likely to normalise in FY25," it said as it maintained 'buy' rating on the stock but cut the target price to Rs 537 per share.

Jefferies also has a 'buy' rating on Coal India stock with a target price of Rs 520 per share.

At 9:47 am, Coal India shares were trading marginally lower at Rs 453.40 on the National Stock Exchange (NSE). So far this year, the stock has risen 18%, outperforming benchmark Nifty 50 which has risen 4.7% during this period.

Operationally, the production of raw coal increased to 241 million tonnes in the fourth quarter as against 198 million tonnes in the previous-year period. Meanwhile, the offtake too improved to 201 million tonnes in Q4FY24 versus 191 million tonnes in Q4FY23.

For the full year 2023-24, Coal India reported a net profit of Rs 37,402 crore, higher by 18%, compared with Rs 31,763 crore clocked in FY23.

Revenue from operations for the full fiscal year jumped 3% year-on-year Rs 1.42 lakh crore. The company had posted revenues of Rs 1.38 lakh crore in the previous fiscal year.

The company garnered Rs 5,743 crore in sales from e-auction during the March quarter, while the sales from FSA stood at Rs 27,016 crore. The overall net sales from raw coal came in at Rs 32,760 crore and the average realisation per tonne was at Rs 1650.31.