Coal India share price target: Can this multibagger PSU stock, consistent dividend payer sustain gains?

Coal India Ltd shares have rallied 22 per cent in 2024 so far and a solid 120 per cent in the last one year on strong coal demand, making investors wonder whether this surge in demand will sustain in the wake of renewable energy push. Analysts largely share positive view on the PSU stock but their target prices in the range of Rs 450-500 suggests most positives are already in the price.

Marketmen noted that Coal India supplies 89 per cent of its production to the power sector and thermal power accounts for over 80 per cent of the total power generated in India. To be sure, India is lagging behind in its FY30 renewable energy target, and the Ministry of Power has set the FY24 electricity generation target at 1,750bu (growth of 7.2 per cent YoY). Out of this, the share of thermal power is likely to be over 75 per cent.

"This augurs well for Coal India to achieve strong coal production in the next few years," said Motilal Oswal Securities, which has a target of Rs 490 on the stock. The brokerage has upped its Ebitda estimates by 9-15 per cent for FY24-26, citing improved outlook on volume, higher e-auction premiums, and lower costs.

Centrum Broking believes that coal demand may stay high and Coal India will be able to efficiently increase volume by 7 per cent compounded annually over FY23-26. It feels the incremental volume of more than 150 mt will generate sustainable Ebitda per tonne of Rs 1,000 per tonne.

"High profitability will ensure enough cash after capex for higher dividend. We expect dividend per share of Rs 30 in each of FY24 and FY25; a dividend yield of 7 per cent," it said while suggesting a target of Rs 458 on the stock.

Elara Securities, which has a target of Rs 453 on the stock, said it remains positive on Coal India given increasing acceptability of coal as a dominant fuel mix and Coal India's solid volume delivery in the past few quarters, in addition to an expected annual dividend pay-out of Rs 20-23 per share, which implies a 7 per cent yield. This brokerage finds the stock worth Rs 453.

Axis Securities values the stock at 5 times 1-year forward EV/Ebitda multiple on FY26 Ebitda estimates. It has revised its target on the stock to Rs 500 from Rs 470 earlier.

On Wednesday, the stock rose 2.84 per cent to Rs 465.25 on BSE.

Also read: Hot stocks on February 14: IFCI, Genus Power, Paytm, SJVN and more