Demand recovery, Aatmanirbhar funds should alleviate concerns on stretched receivables
The shares of public sector undertaking (PSU) Coal India Limited (CIL) rallied 4 per cent ahead of its board meeting scheduled on Monday. The stock hit 52-week high level of Rs 164.90, which was also the day’s high and closed at Rs 162.65, gaining 3.93 per cent at the end of the day. The stock has once again reached its peak after a gap of almost three months. The last time it scaled this level was on February 26, 2021.
As a result of this, the market capitalization (M-Cap) of the company once again crossed the marquee level of Rs 1 Lakh crore and it stood at Rs 1.01 Lakh crore. The free float M-Cap, which is the market value of the shareholding held by the public shareholders stood at Rs 34,328 crore, while the value of the government of India holding stood at Rs 66,672 crore.
The CIL board is scheduled to meet on Monday, June 14, 2021, to consider, audited financial results of the company for the quarter and year ended March 31, 2021, and also to consider the recommendation of the final dividend for 2020-21 (FY21).
CIL has the highest weightage on the BSE PSU index, which ended 29.19 points higher on Friday to close at 7,971.68, up 0.37 per cent. The gains in CIL contributed 13.94 points in the gains of BSE PSU index, the BSE Data indicated.
In the past two weeks, the stock has outperformed the market by gaining 12 per cent as compared to a 2.2 per cent rise in the S&P BSE Sensex.
Coal India reported a strong offtake in dispatches, with volumes at 55.1mt, registering a 37.6 per cent year-on-year (YoY) increase in May 2021. For the first two months of FY22, Coal’s offtake remained higher by 38 per cent YoY at 109.1mt. Offtake growth in May 2021 comes on the back of a 15 per cent rise in coal-based generation (based on initial data from POSOCO) amid a 7 per cent rise in overall power demand, and re-stocking of inventory at power plants (up 5mt MoM).
“With a recovery in demand, e-auction premiums and realisations have shown signs of an improvement. We expect this to eventually seep in (given some lag between allocation and dispatches) and improve as inventory levels at Coal’s mines reduce. The global thermal coal prices have been on an uptrend, which is encouraging for e-auction realizations,” analysts at Motilal Oswal Securities said in a stock update.
With improving offtake and realisations, we see sharp operating leverage coming into play. Notwithstanding any further negative shocks, we expect Coal India’s profitability to recover sharply in FY22 (+29 per cent YoY). Recovery in demand and funds from the Atmanirbhar scheme should help alleviate concerns on stretched receivables, the brokerage firm said.