Jefferies sees a good investment opportunity in a Maharatna PSU stock after recent sell-off; check out target price

Coal India Ltd (CIL) shares have rewarded investors with a return of more than 90 per cent in a year, in stark outperformance to a stunning rally of 30-odd per cent in the headline Nifty50 index. Can you expect more upside in the Maharatna PSU stock?

Foreign brokerage Jefferies has maintained its bullish stance on the Maharatna PSU following recent correction in the stock. It has kept its target for the stock at Rs 520 per share, which implies an upside of 24.7 per cent from Wednesday’s closing price.

Coal India shares have lost 8.5 per cent of their value in the last month while the headline index has risen 1.4 per cent. On Wednesday alone, Coal India shares fell 7.1 per cent in a market-wide sell-off that wiped off 338 points from the Nifty50 to take it off the psychologically important 22,000 mark.

Why is Jefferies bullish on Coal India Ltd (CIL) shares?

According to the brokerage:

The recent decline offers a good buying opportunity

The volume growth trajectory has improved to cater to the country’s rising power demand

The big fall in e-auction prices seems largely behind

The stock trades at a steep discount of 57 per cent to Nifty 50 PE in comparison as against an average discount of 16 per cent over 2011-18

Jefferies sees the stock trading at a price-to-earnings (PE) multiple of 8.3 times the FY25 estimates, as against its average of 13 times over the 2011-18 period.

Record production

Production at Coal India hit a record 703.91 million tonnes in the current fiscal year till March 7, already higher than the entire last year’s outcome of 703.20 million tonnes, the coal ministry said on Friday.

Highlighting that several key measures were implemented to enhance production, the ministry said Coal India maintained an ample stock of 72.70 MT as of March 7.

What is Coal India and what does it do?

Coal India Ltd (CIL) is engaged in the production and sale of coal. While it serves power and steel sectors, it also caters to several industries including cement, fertilisers and brick kilns.

What is a Maharatna PSU?

A Maharatna PSU refers to a category of public sector enterprises in India that holds significant autonomy and power in decision-making. These elite PSUs are granted this status based on their performance, financial strength, and global competitiveness.

With only a few companies holding this prestigious title, Maharatna PSUs are known for their exceptional track record in various industries. The Maharatna PSU status allows them greater flexibility in investments, joint ventures, and strategic decisions.