Coal India shares: ‘FY23 is turning out to be a strong year’, say analysts. Should you buy/hold?

“FY23 is turning out to be a strong year for Coal India boosted by a sharp rise in e-auction realizations on the back of higher global coal prices. However, any easing of global coal prices and higher staff costs post the recent wage revision pose headwinds in FY24. After strong FY22-23E, we see EPS declining 26% in FY24E. We raise FY23-25E EPS by 1-6%, but retain Hold with ₹225 target price (earlier ₹220),” said global brokerage Jefferies.

In a statement, the PSU company said the steep rise in profit came on the back of higher add-on over the notified price in e-auction sale of 14.65 million tonnes coal during the third quarter of FY23.

“With fall in global coal prices, domestic e-auction prices tend to move down further in Q4FY23, which we have factored in. We factored in 700mt of coal volume in FY23 (requires ~6% YoY growth in Q4FY23). Though valuation is cheap, any major uptick in the stock will accrue if FSA price hike happens,” said another brokerage Edelweiss.

It expects e-auction prices to tend lower in Q4FY23 and has cut FY23E EBITDA by 6% to factor in lower e-auction volume/prices and higher employee cost. Any increase in FSA price hike would be a key trigger for the stock (have not factored any hike). The brokerage house has a Buy rating on Coal India shares with a target price of ₹295 apiece.

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