Shares of Coal India Limited surged by 2% to reach a new 52-week high of ₹362.50 in trade on Wednesday, December 6. Over the last three months, the stock has escalated by 60%, driven by the upsurge in power demand that has led to notable volume growth, increased e-auction prices, and peaking costs.

Analysts at domestic brokerage firm Nuvama Institutional Equities have upheld their estimates, foreseeing no downside risk to their evaluations. Maintaining a 'Buy' recommendation on the counter, Nuvama has set a target price of ₹404 within the coming year.

For November 2023, Coal India witnessed sustained high volume at 63.1 million tonnes. However, the growth rate normalized at 6.2% year-on-year due to a higher base and the impact of the festive season. Additionally, on a month-on-month basis, the volume grew by 5.8% per day.

Nuvama highlighted a decline in Coal India's average e-auction premium from 118% in October 2023 to 83% in November. This reduction was attributed to a surge in volumes under e-auction coupled with a contraction in global coal prices.

The firm remains optimistic about Coal India's performance, indicating that its volumes are on track to meet Nuvama's FY24 estimates of 752 million tonnes, requiring a 7% year-on-year growth from December 2023 to March next year.

Despite the drop in e-auction prices in November 2023, Nuvama expects an average e-auction price increase of 10% in the second half of FY24 compared to Q2FY24, contributing to higher Ebitda in the upcoming quarters without any perceived risks to its figures.

Nuvama anticipated a potential upward revision in estimates by at least 10%, likely during the December quarter results, foreseeing a 6% compounded volume growth during FY23-26 due to increased power demand, providing earnings visibility until FY30.

However, Nuvama cautioned that any weaknesses in the ESG (Environmental, Social, and Governance) framework could significantly impact the stock, potentially leading to a major re-rating.