Coal India shares hit a new 52-week high for 2nd day in row; stock jumps 13% - Zee Business analyst decodes what's driving the rally

The government-owned Coal India's shares witnessed a second highest surge so far in its exchanges history since listing. The stock on Wednesday gained nearly 13 per cent to hit a new 52-week high for the second straight session today to Rs 195.8 per share on the BSE intraday trade today.

Before today, the counter had registered the biggest ever intraday surge nearly 14 per cent on two separate days — February 28, 2011, and May 19, 2014. Moreover, it has crossed Rs 190 levels for the first time since January 2020, Zee Business Research Analyst Ashish Chaturvedi decodes.

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The state-owned stock has been rallying on multiple triggers mostly due to price hike and also demand in the international market, especially in China.

Chaturvedi says, there has been a huge surge in coal prices lately in the world market, as the coal price in China has jumped 3x in one year, while lower-grade coal has seen a rise of 150-200 per cent price rise in Australia.

Amid pollution increase as well as winter season been approaching, it’s difficult to produce coal for China. Neither it is being able to reach the emission targets in the country amid pollution rise.

Coal shortage and electricity issue in China has impacted 44 per cent of overall industries dependent on it, says Chaturvedi, adding further, the demand for coal and metals has seen a huge reduction.

At the domestic level, even Coal India is mulling for a steep increase in its price, and soon a price hike announcement is expected, in a phased wise manner and this will have a direct impact on the company’s financials eps, says Chautrvedi. The last price hike company had taken was in 2018.

Chaturvedi says, at the current levels the valuations of Coal India shares are still attractive, it gives 9 per cent dividend yield, moreover, cash to per-share value stands around Rs 28, EV/EBITDA is at 4x, and ROE (return on equity) is at 54 per cent in the last three years.