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Maharatna company to pay ₹15 apiece dividend soon, analysts see new high

With a market valuation of Rs. 1,56,071.09 Cr., Coal India Ltd. (CIL) is a large-cap company that operates in the energy industry. Although having a production of 79 Million Tonnes (MTs), CIL, a Maharatna company, is now the world’s only largest coal producer. The company has released its Q2 results accompanied by a 150% dividend, and after Q2 performance, a number of brokerage firms anticipate that the stock will soon reach a new 1-year high.

The company has said in a stock exchange filing that “The Board of Directors at its meeting held on date has inter alia, declared 1st Interim Dividend for the financial year 2022-23 @ Rs. 15.00/- per share of the face value of 10/- as recommended by the Audit Committee of CIL at its meeting held on date. As already intimated to stock Exchanges vide letter no CIL:XI(D):4157/4156:2022 dated 26.10.2022, the company has fixed Wednesday, 16th Nov’ 2022 as the “Record Date” for the purpose of declaration of 1st Interim Dividend on equity shares for the Financial year 2022-23. The date of payment/despatch of “1st Interim Dividend” shall be by 6th Dec’ 2022.”

As per the data available on BSE, the ex-dividend is falling on 15 November 2022. For the fiscal year that concluded in March 2022, or FY22, Coal India announced a 170.00% equity dividend, or Rs. 17 per share. This yields a dividend of 6.70% at the current share price of 253.40.

In Q2FY23, the firm reported net sales of 29,838.07 crore, up from 23,291.08 crore in Q2FY22, or a YoY rise of 28.11%. The company declared a consolidated net profit of 6,043.55 crore for the second quarter (Q2FY23), up 106% from 2,936.91 crore in the year-ago period or Q2FY22. At 7,687 crore, the profit before tax (PBT) for the September quarter of 2022 increased by more than 111% from 3,643 crore in the comparable period the previous year.

The research analysts of the broking firm ICICI Securities said “We maintain our BUY rating with DCF-based target price of Rs294 on CIL, which is currently trading at 6.6x P/E and 3.1x EV/EBITDA on FY24E basis with 35.2% RoE. It has announced high 1st interim dividend of Rs15/sh (we expect two more payouts in FY23). We believe dividend yield will be 9-10% at CMP.”

The research analysts of the broking firm Axis Securities said “A milder-than-usual start to winter in Europe and continued build-up in inventories has led to a correction in International coal prices from the peak in Sep’22 (still at an elevated level on a YoY basis). As per the latest data from the ministry of coal, the e-auction premium in Sep’22 continued to stay robust and stood at 276% over notified prices. As stated in the Q1FY23 concall, the management expects the e-auction prices to remain at elevated levels for the rest of FY23 at over 4,000/tonne. The e-auction volumes are expected to increase from Q3FY23 onwards. Strong eauction prices and expected recovery in e-auction volumes will continue to drive profitability for CIL. The 700MT production target now looks achievable as YTD Oct’22 production stands at 351.9 MT (midway of the FY23 target of 700MT, up 17.5% YoY). For FY24, the government mandate is 840MT and we model in lower volumes as of now in our forecast of 750MT. While the volume growth YoY will be the driver for profitability in the long term, in light of the volatility in the international coal prices, progress on wage negotiations as we move ahead, and the recent run in the share price, we reduce our target multiple to 4.0x from 4.3x earlier. We maintain our BUY rating on Coal India and value the company by assigning a 1-year forward EV/EBITDA multiple of 4.0x on Dec’24E Adj EBITDA (rollover from FY24E). We arrive at our target price of 275/share (from 262/share), implying an upside of 10.3% from the CMP.”

The research analysts of the broking firm Motilal Oswal said “Consequently, we again raise our FY23 EBITDA/PAT estimate by 22%/27% after a 23% bump up in 1Q. We also raise our FY24 EBITDA/PAT estimates by 6%/3%, respectively, and our TP to INR 325 (up from 265), valuing the stock at 4x FY23 EV/EBTIDA. We reiterate our Buy rating on the stock and COAL continues to be our top pick in the metals sector. The stock trades at an inexpensive valuation of 3x/4.8x our FY23/24 EV/EBTIDA. On P/B, the stock trades at 2.6x/2.2x on FY23/24 estimates. The company has declared an interim dividend of INR 15 and we estimate DPS of INR 26.7 for FY23.”

The shares of Coal India closed on Friday at 253.40 apiece, down by 0.08% from the previous close of 253.60. The stock had touched a 52-week-high of 263.40 on (09-November-2022) and a 52-week-low of 139.15 on (20-December-2021). The target price set by the above brokerage companies would be a new 1-year high for the stock if achieved.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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