Coal India can declare its highest-ever dividend per share (DPS) of ₹30 for FY24, said analysts at Nuvama Wealth Management. In a research report, Nuvuma analysts, Ashish Kejriwal and Jyoti Singh, said, “We are raising DPS estimates from ₹20 to ₹30 for FY24 and ₹25 for FY25.” The FY24 DPS will translate into an annualised dividend yield of 21 per cent, the domestic brokerage said, while reiterating its Buy rating on the stock with a higher 12-month price target of ₹389 (earlier ₹361), excluding dividend pay-out of ₹30/25 in FY24/FY25.

They highlight that FY24 DPS of ₹30 could be interim and should be paid out in H2 FY24 (annualised dividend yield of about 21 per cent). “This is quite possible in a pre-election year as CIL is likely to generate free cash flow of ₹22,000 crore/₹19,500 crore in FY24E/FY25E.”

Demand to rise

With the monsoon receding and hydro/wind generation falling, demand for thermal power is set to rise further in H2 FY24. The rise in global coal prices coupled with an uptick in industrial activity pushed up the e-auction premium to 106 per cent in September 2023 from 54 per cent in June 2023. 

During FY18–22, CIL recorded average EBITDA of ₹25,100 crore versus the FY24 EBITDA of ₹40,880 crore, up 0.6 per cent y-o-y. “With higher volume, partial FSA price hike (on 30 per cent of volume) and cost peaking out, we believe CIL would continue to generate EBITDA much above average in the foreseeable future. Despite the stock rallying about 25 per cent since September 23, we expect further upside potential of 35 per cent within a year, excluding the dividend of ₹30 in H2 FY24E and ₹25 in FY25E,” the analysts added.