Nuvama Institutional Equities has raised its target share price for Coal India Ltd, citing several factors that make the company an attractive investment. The domestic brokerage firm pointed out three key benefits for investors: e-auction prices, volume growth, and the potential for an all-time high dividend in FY24.

Nuvama revised its FY24 Ebitda estimate upward by 9% and FY25's by 8% to account for higher e-auction prices and volume. These adjustments, along with a valuation rollover of 4.5 times FY25/FY26 averages, result in a higher fair value estimate of Rs 389 per share, up from the previous estimate of Rs 361 per share. This valuation excludes the expected dividends of Rs 30 per share in FY24 and Rs 25 per share in FY25.

One of the driving factors behind this optimistic outlook is the rising demand for thermal power due to reduced hydro and wind generation, coupled with increased industrial activity. These factors have pushed up e-auction premiums for coal, with the premium reaching 106% in September, up from 54% in June.

Nuvama expects further increases in coal demand from thermal power plants, possibly leading to a diversion of coal from non-power sectors to the power sector in the second half of FY24. This should result in firm e-auction prices. As a result, Nuvama has raised its average e-auction price estimates to Rs 3,000 per tonne for FY24 and Rs 2,248 per tonne for FY25.

Additionally, the brokerage firm anticipates that Coal India will achieve an all-time high dividend in FY24, with estimates of Rs 30 per share, which could be interim and paid out in H2FY24. This is supported by Coal India's expected free cash flow of Rs 22,000 crore in FY24 and Rs 19,500 crore in FY25, making it an attractive proposition for investors.

Nuvama also highlighted Coal India's strong historical performance, with an average Ebitda of Rs 25,100 crore from FY18 to FY22, compared to the estimated FY24 Ebitda of Rs 40,880 crore. Despite a 25% rally in the stock since September, Nuvama sees a further upside potential of 35% within a year, making Coal India an appealing investment option.