In the current global scenario, India's largest mining company, Coal India Ltd (CIL) offers three benefits of e-auction prices, volume growth, and possibly all-time high dividend in the second half of financial year 2023-24 (H2FY24), Nuvama Institutional Equities said in a note.

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The domestic brokerage house has raised its target price on the counter to Rs 389 from Rs 361 earlier, indicating a further upside of 35.44% from the current market levels.

The Coal India stock settled 0.21% lower at Rs 287.20 apiece on the NSE on Monday. CIL shares rallied 28% on a year-to-date basis, while it gained 25% in the last one year.

Despite the stock rallying 25% since September 2023, Nuvama expects further upside potential of 35% within a year, excluding the dividend of Rs 30 in H2FY24E and Rs 25 in FY25E.

The brokerage has revised its FY24 EBITDA estimate by 9% and FY25's by 8% to factor in higher e-auction price and volume. "This along with a rollover and valuation of 4.5 times FY25/FY26 average yields an increased fair value of Rs 389 (earlier Rs 361), excluding dividend per share (DPS) of Rs 30/25 in FY24/FY25," it said.

Nuvama has raised its DPS estimates from Rs 20 to Rs 30 for FY24 and Rs 25 for FY25. Nuvama said that FY24 DPS of Rs 30 could be interim and should be paid out in H2FY24 (annualised dividend yield of 21%).

"This is quite possible in a pre-election year as CIL is likely to generate free cash flow of Rs 22,000 crore/Rs 19,500 crore in FY24E/FY25E," it said.

During FY18–22, Coal India recorded an average EBITDA of Rs 25100 crore against its FY24E EBITDA of Rs 40,880 crore.

"With higher volume, partial FSA price hike (on 30% of volume) and cost peaking out, we believe CIL would continue to generate EBITDA much above average in the foreseeable future," it said.

Coal India is also a part of the top 10 dividend-paying companies. At a dividend yield of 8.2%, CIL tops the list of the highest dividend-paying companies, according to domestic brokerage firm Religare Broking.

In FY22, Coal India's DPS stood at Rs 17 and in FY23, the DPS stood at Rs 24.3, the brokerage said.

First Published:Oct 10, 2023 8:55 AM IST