Stock to buy: Coal India to benefit from stock auction; analyst sees 9% short term gains

Stock to Buy: Coal India is expected to benefit from higher margins from sale of coal via stock auction route. The company is left with surplus coal because of higher output.  

Sale through stock auction gives higher margins and the state-run miner will likely gain because of access coal available with it.  

In the first six months of FY23, the company sold 30 mn of coal via e-auction method.  

The output has risen by 17 per cent year-on-year between April and September. In Q2FY23, the company garnered 21 per cent of its total income via e-auction. 

The company is likely to post record profits this financial year.  

The price of coal has gone up to record levels since May. European Union is focusing on reducing dependence from Russian gas exports in the wake of Russia-Ukraine war.  

Moreover, the flood situation in Australia has impacted mining of coal.  

The company is expected to benefit from these developments. 

Shares of Coal India settled at Rs 231.80, down 0.26 per cent on NSE.

Technical Analyst Nilesh Jain recommends a buy in Coal India stock on declines. The stock has corrected and the risk to reward appears benefit at current levels, he further said. He puts the stop loss at Rs 225 while the price target at Rs 240 and Rs 250. The view is for short term in this stock. 

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The dividend payout to investors is also significant, Jain said. He is Assistant Vice President - Lead Derivative and Technical Research at Centrum Broking.

Coal India shares have outperformed the Nifty50 by 47 per cent and has given 53 per cent returns over a 1 year period according to data sourced from Trendlyne.

The stock is also less volatile with Beta at 0.84. A number below 1 indicates less volatility.

The stock hits its 52-week high of Rs 263.40 on 9 November 2022.

Inputs from Arman Nahar  

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)