I would be little cautious about Coal India ROCE going forward, as it has reduced Dividend Payout from 60% in FY22 to 42% in FY24. As a result, Reserves have increased from 36,980 to 76,567 Crores during the same period.
While this reserved profits will be certainly used for capacity expansion and expanding its Business lines, I believe that, moderation of Coal prices might have mild negative impact on Margins, Net Profits and ROCE will be under pressure.
Market may not elevate its P/B as it did during 2021 to 2024, and further re-rating in the stock could be limited. Margins are still good at about 33% and ROCE is also good at 64% but further improvement could be limited or Negative.
With reduced Dividend Yield at this Price point, I am more cautious now going forward compared to 2021 and 2022.
Disclosure: I have reduced my holding after the surge in Stock Price during 2023 and 2024, but may continue to hold it as a Dividend Stock with 4% to 5% Dividend Yield expectations. I might be wrong in my analysis as I am not a SEBI registered analyst.
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