Coal India is shining bright
last week, while Indian benchmark indices and much of the broader market were deep in the red, one stock was doing the stark opposite. Coal India’s share was sitting on intraday gains of over 12% at a fresh 52-week high of ₹195.2/share. its >30% rally over the past three weeks has seen its market cap rise to ₹1.18 lakh crore, helping it re-enter the list of top-50 companies in India by that metric.
there are multiple factors driving this surge.
the latest rally began with the declaration of its Q1 FY22 results. the numbers showed an impressive recovery, and projections were encouraging. its fuel supply in the quarter increased by 27.2% over the year-ago period, from 161.87 Mt (million tonnes) to 205.90 Mt.
the earnings report also came with a couple of significant announcements. first, the suspension of production from 12 mines out of 23 identified for closure in FY21 would save over ₹500 crore. second, based on the demand projection for the coal sector in ‘Vision 2024’, Coal India has envisaged 1 billion tonne coal production in the year 2023-24.
as per the IEA’s India Energy Outlook 2021 report, demand for coal will grow 31% over 2019 by 2040, from 413 Mtoe (million tonnes of oil equivalent) to 541 Mtoe. with an ~80% share of India’s coal market and a ~55% share of the country’s overall commercial energy market, Coal India has plenty of growth ahead.
it has also recently ramped up output to address the coal crunch in several areas of the country. with neighbouring China also facing a shortage of coal, new opportunities for export might open up. at the least, there’s scope for an increase in the prices, which Coal India’s CMD expects will happen soon in the range of 10%.
as mentioned, the state-owned firm holds a major stake in the energy sector even apart from coal. it’s also tuned into the ongoing revolution towards renewable energy, and expanding its footprint in the sector. it recently agreed to a joint deal with NTPC to set up a 50 MW solar power plant in Maharashtra and boosted its solar rooftop capacity to 692 kW.
the future looks bright for the ‘black diamond’.