Curious Case of Coal India

Stock Opportunities
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Why I think Coal India can turn into 3X Multibagger in next 7 years.
CMP - INR 116

  1. Coal Requirement for India will continue to go up. Coal India produces 600MT and we still import 300MT a year. With private players coming, I don’t see this affecting Coal India for next few years. Coal India is targeting 1000MT by 2025 (For comparison China consumes 6X more coal then India)
  2. Dues from Power sector have come down and as lockdown opens this should normalize.
  3. They managed to stay EBITDA positive in June. And I expect EPS to be around Rs. 20 this year.
  4. Most likely dividend of INR 12+ would be maintained. Assuming they pay INR 12 as dividend and you make 8% Compounded on that. That’s INR 136 in the next 7 years. In most likelihood dividend should be far better.
  5. Assuming the economy normalizes and EPS after 7 years is around INR 30. I would believe that the stock price should be around INR 270 - INR 300.

So INR 136 (Dividend) + INR 270 (Stock Price) = INR 406 (Next 7 years fairly positive we are looking at 3.5x bagger here).
My Thread on same - https://twitter.com/chaitanyakha/status/1309009895568670725

Risks (Afterthought):

  1. Pandemic gets worst and we see another lockdown. God save the economy if that happens.
  2. Capex of INR 10,000 crores for 2020-2021. Hard to put on hold.
  3. Government Selling Stock in Open Market. Ideally Coal India should just buyback.

Feedback invited.

Disclosure - Invested. And do your own research. This is just what I think. No suggestions / tips. I am not a SEBI advisor.

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