Here are the four reasons why Jefferies sees the correction in Coal India’s share price as an opportunity to buy:

Introduction

1. Strong Volume Uptick: Coal India has been experiencing significant volume growth during FY24. Dispatch volumes have rebounded, growing at a Compound Annual Growth Rate (CAGR) of 10% between FY21-23 and 9% during FY24 till date. This growth is attributed to the country’s strong economic momentum and increasing power demand, leading to a rise in coal demand for thermal power production.
2. Fall in E-Auction Premiums: Coal India indicated in a recent investor call that the e-auction price premium over linkage coal has decreased, mainly due to increased supply of e-auction volumes. Jefferies estimates a lower e-auction price premium during FY25–2026 compared to previous years, which is expected to benefit the company.

1. Strong Earnings Outlook: Coal India’s earnings per share (EPS) for FY23 increased by 63% year-on-year, surpassing the peak EPS of RS 28 recorded during FY10-22. This growth was supported by rising global coal prices, increasing e-auction realizations, and volume growth. Analysts anticipate further EPS growth in FY24, expecting it to rise to ₹51.
2. Favorable Valuations: Despite the recent correction, Coal India’s price-to-earnings ratio (P/E) has become reasonable at 8.3 times FY25 estimates. Additionally, the stock is currently trading at a significant discount to the Nifty-50 P/E, providing an attractive valuation. Jefferies’ target price of ₹520 suggests a potential upside of more than 20% from current levels, indicating favorable valuations for investors.

Overall, Jefferies views the correction in Coal India’s share price as an opportunity to buy, considering the company’s strong volume growth, decreasing e-auction premiums, robust earnings outlook, and favorable valuations.

The post Coal India’s share price as an opportunity to buy appeared first on ASWGROUPINDIA.