There are several factors that could support a re-rating in Coal India Ltd.'s shares, including attractive valuations, robust coal demand and the potential for higher e-auction premiums, according to Parag Thakkar, Head of Fund Management at Fort Capital.
Speaking to NDTV Profit, Thakkar highlighted that Coal India shares are currently trading at around 8 times earnings, while offering a dividend yield of nearly 6%. He also pointed to low coal inventories at power plants, which could support sustained demand for the fuel.
“Everything is set for Coal India to make more money,” Thakkar said, citing stronger demand, higher e-auction premiums and expectations of an increase in e-auction volumes.
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Despite these favourable factors, Coal India share price has remained relatively subdued. The shares have gained around 5% over the past month and are up just over 6% on a year-to-date (YTD) basis.
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Thakkar said the limited movement in Coal India stock price makes it more attractive from an investment perspective. “I would always love to buy those stocks which have not moved. After moving, what's the fun in that? There are enough, I would say, there are so many reasons for Coal India to go up,” he said.
Morgan Stanley Upgrades Coal India
Thakkar's positive view comes as Morgan Stanley upgraded Coal India to ‘Overweight' from ‘Equal-Weight' and raised its target price to Rs 480 from Rs 420.
The brokerage said accelerating thermal power demand, sharply depleted coal inventories at power plants and rising global thermal coal prices could support an increase in Coal India's production volumes and e-auction premiums.
Morgan Stanley expects these factors to result in significant earnings upgrades for the state-run miner, which could provide a further catalyst for Coal India stock price over the coming months.
At 10:20 AM, Coal India share price was trading 2.39% higher at Rs 424.40 apiece on the BSE.
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