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Coal India: Nuvama slashes target price, recommends “sell on rise”

Stocks
2 min Read Sep 5, 2024
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Coal India: Nuvama slashes target price, recommends "sell on rise"

Coal India's share price took a hit after brokerage Nuvama decreased its target price for the PSU stock.

Nuvama's downgraded target

Nuvama reduced its target price for Coal India by 4% to ₹542 from the previous ₹567. This downward revision was primarily attributed to a 12% year-on-year (YoY) decline in sales volumes and reduced auction prices.

Key risks and concerns

The brokerage highlighted several risks that could impact Coal India's future performance, including:

  • Fluctuating coal prices: The global coal market is subject to volatility, which could affect the company's profitability.

  • Potential government stake sales: There is a risk of the government diluting its stake in Coal India through Offer for Sale (OFS), which could impact the share price.

  • Transition to renewable energy: The increasing adoption of renewable energy sources could reduce the demand for coal in the long run.

Nuvama's recommendation

Given these risks, Nuvama maintained its "sell on rise" recommendation for Coal India. The brokerage suggested that investors should book profits on any potential price increases.

Coal India's outlook

Despite the challenges, Nuvama believes that coal will remain the dominant fuel source for the foreseeable future due to the ongoing transition from Russian natural gas and increasing domestic industrial activity. The brokerage expects Coal India's production and evacuation capacity to reach one billion tons by FY28.

Share price analysis

Coal India's share price opened at ₹515.05 on BSE, with an intraday low of ₹502.45 and an intraday high of ₹516.20. Analysts suggest that the stock is in a short-term consolidation phase, with support around ₹490 and resistance between ₹530 and 540. 

While Coal India remains a significant player in the Indian coal market, investors should carefully consider the risks and uncertainties associated with the company before making any investment decisions. If you're looking for a share to buy, it's essential to conduct thorough research and consider factors such as the company's financial performance, industry trends, and risk tolerance.