Motilal Oswal sees 27% upside in Nifty's second best performing stock

Motilal Oswal has raised target price for Coal India, which is the second best performing stock in Nifty on a year-to-date basis in the calendar year 2022, to Rs 325 after it reported the highest ever Q2 EBITDA. The new target price signals an upside potential of 27% from the current market price of Rs 256.

"We believe the consensus will continue to upgrade its FY23 estimates, driven by strength in the E-auction premiums. We are almost 20% higher than the consensus on FY23 estimates and expect consensus to continue to catch up," Motilal Oswal said in a report.

Coal India in Q2FY23 reported a 106% year-on-year (YoY) gain in profit at Rs 6,044 crore. In the same quarter a year ago, the PAT was at Rs 2,933 crore. The company's consolidated revenue jumped 28.1% YoY to Rs 29,838 crore during the quarter and its consolidated EBITDA stood at Rs 7,280 crore.


The company also announced a dividend of Rs 15 per share and has fixed the dividend date as November 16.

The stock trades at an inexpensive valuation of 3x/4.8x our FY23/24 EV/EBTIDA.

"Consequently, we again raise our FY23 EBITDA/PAT estimate by 22%/27% after a 23% bump up in 1Q. We also raise our FY24 EBITDA/PAT estimates by 6%/3%, respectively, and our target price to Rs 325 (up from 265), valuing the stock at 4x FY23 EV/EBTIDA. We reiterate our Buy rating on the stock and Coal India continues to be our top pick in the metals sector," the brokerage said.

The stock, which was trading 2.48% higher at Rs 255.7 comes with a dividend yield of over 6%. In the last six months, the counter rose nearly 50% while it has surged about 65% year-to-date.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)