Coal India‘s share price has surged up over 120% in the past year. However, analysts at PhillipCapital think the stock still has some steam left.

The Coal India Analysts: Vikash Singh-led analyst team at PhillipCapital initiated coverage on the stock with a target price of ₹611. The target indicates an around 23% upside from the stock’s last closing price of ₹497.75.

The Coal India Thesis: The analysts said Coal India will continue to meet the majority of India’s energy needs. The revival in thermal power capital expenditure will drive most of the company’s volume growth, the brokerage firm said.

Industry estimates suggest coal requirements will increase by 400-450 million tonnes over the next six to seven years, and as per the firm’s projections, Coal India will supply a significant portion of this demand, maintaining a volume compound annual growth rate in the high single to low double digits for several years.

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This volume growth will strengthen Coal India’s balance sheet, with cash generation exceeding cash burn, thus supporting dividend yields, the brokerage added.

The analysts also highlighted that Coal India has significantly increased its EBITDA per tonne over the past few years. In FY24, its adjusted EBITDA per tonne was ₹555 compared with ₹377 in FY20, primarily driven by higher volumes and better blended realisations due to higher e-auction prices, which are a major source of profitability for the company.

Although the brokerage expects overall EBITDA per tonne to moderate to around ₹500, it will still be higher than pre-COVID levels, the brokerage estimates. International coal prices have already bottomed out, supporting blended realisations, while volume growth will continue to bring in economies of scale.

Price Action: Coal India’s share price was up 2.56% to trade at ₹510.50 in the early hours of trading on Tuesday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.