Hyderabad Investment：Coal India shares may rise 25% in next 12 months, says Jefferies post recent correction

Brokerage firm Jefferies believes that the recent correction in shares of Coal India Ltd. offers a good buying opportunity. The brokerage has maintained its “buy” recommendation on India❼largest mining company with a price target of ₹520.

The price target from Jefferies implies a potential upside of 25% from Wednesday❼closing levels.

Coal India❼shares have corrected 14% from their recent peak of ₹487.Hyderabad Investment

Jefferies believes that Coal India❼volume growth trajectory has improved to feed India❼rising power demand. It is factoring in dispatch volumes to rise 8% in the current financial year and then grow at a Compounded Annual Growth Rate (CAGR) of 6% over financial year 2024 – 2026.

In an analyst call last month, Coal India❼Chairman PM Prasad had mentioned that the company will fall short of its financial year 2024 production target of 780 MT by 10 MT. He also spoke of declining e-auction premiums, which had spooked the street, sparking the correction in the stock from its all-time high.Indore Investment

Jefferies believes that the big fall in e-auction prices seems largely behind. The auction price premium over linkage coal, which was at 228% at the end of financial year 2023, fell to 117% in the December quarter of financial year 2024 and is currently between 36% to 50% in January and February this year.

The brokerage is anticipating e-auction price premium of 50% in financial year 2025 – 2026 compared to an average of 63% between financial year 2011 – 2022.

Coal India is trading at a steep discount of 57% to the Nifty 50 compared to an average 16% discount over 2011 – 2018, according to Jefferies. On a financial year 2025 estimated Earnings Per Share (EPS) basis, the stock is trading at 8.3 times, which is lower than the average of 13 times between 2011 – 2018.

Jaipur Investment