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On Tuesday, CLSA analyst Indrajit Agarwal revised the price target for Coal India Ltd (NSE:COAL:IN) to INR 490.00, a decrease from the previous INR 560.00, while still maintaining an Outperform (2) rating on the stock. The adjustment follows Coal India's third-quarter results, which Agarwal noted aligned with expectations. The company reported a year-over-year volume growth of 2%, a figure that had been previously announced.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) excluding overburden removal (OBR) per ton decreased by 14% year-over-year to Rs 536. The cash cost, also excluding OBR per ton, saw a 3% year-over-year increase, largely due to a rise in contractual expenses. However, there was an 8% quarter-over-quarter increase in e-auction realisation, with volumes making up 10% of sales, compared to 9% in the previous quarter.
The report from CLSA anticipates that near-term volume growth for Coal India will continue to be strong following a muted calendar year 2024. The analyst cited a 7% dividend yield as one of the reasons for viewing the risk-reward balance as favorable, which supports the decision to maintain the Outperform rating despite the lowered price target.
Agarwal highlighted that a gradual improvement in volume growth and an uptick in Fuel Supply Agreement (FSA) realisations would be crucial factors for a potential re-rating of Coal India's stock. The company's performance and future outlook seem to be underpinned by these key elements as it navigates the market.
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