Shunned by ESG funds and ignored by retail investors, the stock of mining giant
has topped the Nifty charts so far in 2022 with an impressive return of around 36 per cent. The hefty dividend yield of 8.5 per cent, way above any bank’s fixed deposit interest rate, is the cherry on the top for investors.
On the other hand, during the period a number of Dalal Street favourites, including
(down 22 per cent), (down 20 per cent), (down 15 per cent) and (down over 8 per cent), have eroded wealth in double digits. Headline index Nifty50 itself has lost over 6 per cent.
The list of other top gainers so far this in this calendar year include (25 per cent), (24 per cent), Mahindra & Mahindra (24 per cent), (19 per cent), (16 per cent and (15 per cent).
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Coal India (), in which the central government holds two-third stake, is the star performer even in the last one-month period with a return of over 17 per cent. The stock had hit a 52-week-high of Rs 209 on April 22, 2022 and is now trading at a PE of 10.91.
Out of 23 analysts covering the stock, 13 have a ‘strong buy’ rating and four have ‘buy’ ratings.
In the March quarter, the mining giant had reported its consolidated net profit at Rs 6,692.94 crore, up 45.91 per cent from Rs 4,586.78 crore in the same quarter last year.
“Continued higher demand for domestic coal due to high thermal power PLFs and elevated international coal prices resulting in high e-auction premiums (345 per cent in April 2022), combined with lower cost pressures may result in CIL clocking a better FY23,”
said in a report.
has a target price of Rs 230 on CIL, valuing it at 4x FY23E EV/EBITDA.
is also bullish on the stock given its high dividend yield and near-term triggers of rising e-auction realisations and power demand driven offtake growth in FY23. “We estimate 12 per cent earnings CAGR (FY21-24), which factors 7 per cent volume growth in FY23/34, elevated near term e-auction prices and benefit of operating leverage on rising sales with stable costs (not factoring wage hike risk). Incremental power demand growth in FY23-24 can lead to higher than assumed (7 per cent) volume growth,” it said.
Parag Parikh Flexicap Fund, whose portfolio is widely tracked by long-term value investors, had last month picked up 19 lakh shares of CIL.
However, funds that follow the environmental, social and governance (ESG) parameters have been avoiding CIL due to the massive environmental damage done by using fossil fuel.
According to Morningstar Sustainalytics’ ESG Risk Ratings report, CIL currently falls under the high risk category with a score of 37.2. A score of up to 20 is considered low while anything above 40 is treated as severe.
Retail investors, who have been braving the FII selloff to pump money in the equity market, also don’t sound excited about Coal India. BSE data shows retail shareholders (with holdings below Rs 2 lakh) reduced their stake in the PSU stock from 3.86 per cent at the end of December 2021 to 3.19 per cent in the March quarter.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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