In just 10 months, the stock price of Coal India has skyrocketed from ₹229 to ₹489, marking an impressive 113% increase. Over a period of 3 years, the stock has surged by a staggering 235%.
Coal India, being the largest coal producer in India, has greatly benefited from the increasing demand for power, as about 50% of India’s electricity comes from coal-based plants.
Ramping Up Production
To meet the growing demand for power, Coal India has been ramping up its production. In the past four years, it has invested over ₹640 billion in various projects like land acquisition, railway capacity enhancement, and setting up new machinery. These efforts are aimed at increasing production to 1 billion tonnes.
In the fiscal year 2023-24, Coal India achieved its highest production and sales, recording 773.6 million tonnes and 753.5 million tonnes, respectively. This growth was mainly driven by increased dispatches to the power sector, which rose by 5.4% compared to the previous year.
Future of Coal Demand
Despite the growing focus on renewable energy, coal-based thermal power remains crucial for India’s energy security. The sector faces challenges, but coal demand is expected to continue growing until 2035, before slowing down.
Coal India has significantly increased its capital expenditure (capex) to support its production growth. Over the past four years, capex has been rising steadily. The company plans to invest around ₹165 billion in FY25, with a major focus on machinery, land acquisition, and solar projects.
Strengthening Logistics
Enhancing railway infrastructure is another key focus area for Coal India. By strengthening railway dispatches, the company aims to improve logistics and meet the rising demand for coal.
Based on its positive performance and future prospects, brokerage firms estimate an 11.9% revenue growth rate for Coal India over the next few years. The company is valued at ₹545 apiece, considering factors like increased volumes, improved logistics, and growth in power demand.
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