Coal India - Danger positives ahead

protrade

Well-Known Member
#1
Coal India has had some interesting news flow in last few weeks. And market doesn’t seem to have reacted to that much!

- Company has announced a final dividend of ₹3.5 per share - with no record date yet! July futures aren’t discounting this, neither are August!

- They have announced resumption of exports of coal. Should obviously increase realizations.

- They have announced a road map to reduce workforce over time. Should obviously increase profit margins.

- They have announced deals for Coal Bed Methane - should increase clean coal initiatives.

- eAuctions are going well, should increase coal utilization.

- They are investing in other non-coal projects as well.

All things considered, the stock is poised for a big jump up - seems like a no-brainer with this dividend yield.
 
#3
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The Monthly chart surely shows a lot of volume like never before and the price action doesn't show any weakness as such surely looks like accumulation to me. It's a long term bet.
 

protrade

Well-Known Member
#4
There are a few negatives with Coal India - but these are all factored in, and one can say even overblown!

- The share of Coal will decline in India's energy mix - however, while the percentage share of coal falls, the absolute utilization will go up for at least 10 more years. Even today, though Solar is cheaper in day time, Coal is still cheaper for 16 hours of the day. If you consider storage cost of electricity for night use, coal is massively cheaper than solar.

- Unlike Oil, which is used almost entirely in a decentralized way, 99% of coal utilization happens in large scale units, centrally. There are technologies available for mitigating environmental impact in a cost effective way in centralized use case scenarios.

- It is still significantly owned by the government - so there are fears of divestment related selling pressure. Which is fair. However, it is trading at over 10% Dividend Yield, and just over 6 times PE multiples. Which are ridiculously cheap.

- The initiatives undertaken by Coal India to increase productivity - by retiring 5% of work force every year - should increase productivity and profits substantially in next 5 years - more than offsetting any impact from environmental factors.
 

mastermind007

Well-Known Member
#5
There are a few negatives with Coal India - but these are all factored in, and one can say even overblown!

- The share of Coal will decline in India's energy mix - however, while the percentage share of coal falls, the absolute utilization will go up for at least 10 more years. Even today, though Solar is cheaper in day time, Coal is still cheaper for 16 hours of the day. If you consider storage cost of electricity for night use, coal is massively cheaper than solar.

- Unlike Oil, which is used almost entirely in a decentralized way, 99% of coal utilization happens in large scale units, centrally. There are technologies available for mitigating environmental impact in a cost effective way in centralized use case scenarios.

- It is still significantly owned by the government - so there are fears of divestment related selling pressure. Which is fair. However, it is trading at over 10% Dividend Yield, and just over 6 times PE multiples. Which are ridiculously cheap.

- The initiatives undertaken by Coal India to increase productivity - by retiring 5% of work force every year - should increase productivity and profits substantially in next 5 years - more than offsetting any impact from environmental factors.
Dividend of 3.5 rs / share of 150 rs odd is OK OK. Since Dividend is now taxable, it has completely lost its lustre for investment. It means more paper work at return filing time.

5% of work force reduction? For how many years? What is replacement rate? How much extra work force do they currently have?

One thing I have learnt with experience is that Indian PSUs (whether Navratna or any ratna) excel at wastage of resources (both scarse as well as ample) and rarely turn around in time to handle the competition head-on. Most departments within most PSUs are overwhelmed with administrative tasks relating to leave, promotions, PF and petty politics (caste, gender, affairs etc....). Also, in an attempt to thwart corruption, the PSUs routinely stack Inspectors over Inspectors over Inspectors..... Actual genuine work is done by about 20% of the work. Rest are just managers over managers managing the work mule.

Reading between the COALINDIA's announcement that says increasing productivity can be gained by reducing work force implies that they too are way way over-staffed.
 

brokenbull

Well-Known Member
#7
On the subject of navratnas ,Govt selling stake at NMDC at 5% below yesterdays price(selectively leaked to friends & families offcourse . fell 7 points yesterday (from 182 to 175)when the metal index was up.(announced selling floor price 165 after market close )
Today I placed bids at 165.05 &168.05 . not done yet.
 
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