Coal India is trading at a mouth-watering level ( ₹177), Here’s why!


3 min read
Coal India is trading at a mouth-watering level ( ₹177), Here’s why!

One of the safer bets in the market is mining stocks. The margins in the business are attractive and generally, these companies are cash-rich companies, which are zero debt. Whether, it is an iron-ore mining company like NMDC or lead and zinc mining company like Hindustan Zinc, valuations are rather attractive. As result companies maintain a better top and bottom line.

I will talk about Coal India, here is the 10 effective Coal India is trading at mouth-watering levels and can be even considered one of the safest investments in Indian Stock market.

  1. Coal India is the world’s number 1 coal mining company, with significant reserves in place.

2. While watching Zee Business I saw the news that Today Coal India announced that the company is likely to sell 4 of its subsidiaries and book a pretax profit of ₹22,000 Cr. So Coal India will surely get the benefits that affects the cash reserves as well. (Source: Zee Business exclusive)

3. In the month of March, the company is expected to give a huge dividend (approx 20–25 Rs per share).

4. On Feb 18, 2020 Union Coal and Mines Minister Pralhad Joshi has announced that the government looks to stop the substitutable import of thermal coal from 2023–24. The government wants to bridge the substitutable shortfall by 2023–24, This will definitely boost the topline as well as the bottom line.

5. The Coal India stock is trading at a p/e of just 8–9 times one year forward earnings, making the stock a good pick at the current levels. The stock has also recently hit a new 52-week low of Rs 171.75.

6. 1 Month Delivery volume increased by 144.57% and 1 Day Delivery volume increased by 2.52% over 5-day average. Means more investors are buying Coal India for investment purpose.

7. Major shareholders: Majority shareholders are Promoters (THE PRESIDENT OF INDIA ACTING THROUGH MINISTRY OF COAL (69.05%), Mutual Funds held in 29 Schemes (6.83%)), FIIs held by 580 FIIs (8.59%),

Highest public shareholders: LIFE INSURANCE CORPORATION OF INDIA P & GS FUND (10.94%)

8. The finance minister also proposed abolishing the Dividend Distribution Tax (DDT) in the recent budget. Currently, dividends are taxed at the company level at a rate of 20.5%. However, now companies will pay the full dividend to investors, who in turn will have to pay taxes. So, this must be good news for high dividend yield companies to improve their figures.

9. Coal India has extraordinary fundamentals.

ROCE: 109% | ROE: 74.90 % | Stock P/E: 5.85 (Ind PE is 7.43) | Debt to equity: 0.05 | Interest Coverage Ratio: 59.02 | Inventory turnover ratio: 16.55 | Return on invested capital: 29.71 % | Pledged percentage: 0.00 % | Free cash flow 5years: 46,575 Cr.

10. Stock Price targets of major brokerage houses.

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“Long term investor should only buy fundamentally strong stocks when they are in pain & in oversold territory” — My 10 years of Experience

Thanks!

Akshay Seth
Linkedin | Twitter | Quoraakshay.equity@gmail.com

Source: Blog | equityboxx

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