Coal India Limited likely to robust earnings, pay higher dividend.

In the FY22, the shares of Coal India are seen trading six-times their expected earnings with an estimated 12.9% dividend yield. In the fourth quarter of FY22, a 12.8% yearly rise in volume was reported by India’s largest coal producer leading to an overall growth of 17.6% for the first nine months of FY22.

As compared to FY20, data shows an increase in the overall surge of 15.4% in the year FY22. The offtake would be 660 MT if the company ends the year with 15% volume increase, which is significantly higher than the consensus analyst expectations of 610-635 MT. Less stocks and high-power demand has not only led to a rise in volume, but also the price.

After a strong demand from China, September 2021 witnessed an increase in imports of coal to 76% than the previous years and as a result, October 2021 saw a 3times surge in international coal prices. Though the international coal prices are corrected since then, they still continue to remain elevated.

The primary reason for cheap trading is the increasing concern for renewable energy, but, the numbers, on the other hand, reveal a different narrative. Analysts also consider the fact that solar is not sufficient to replace coal completely and thus, the present resource is sufficient to sustain at least near-to-medium demand. In order to minimize shortages throughout the summer, the government has also instructed electricity producers to arrange for imported coal.

Last year, CIL implemented several new fees, including loading and evacuation fees. It will also profit more from coal sold through e-auction, which is not covered by the fuel supply deal. Also, Coal India has not implemented any significant price increases in the last three years, although increases are expected soon due to rising expenses.

Therefore, analysts predict a 25% increase in earnings in FY22 and a 17% increase in FY23. Along with this, CIL has already paid an interim dividend of $9 per share, representing more than 90% of its earnings in the first half. The final dividend could be even greater due to higher profitability in the third and fourth quarters.

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