Multi-Bagger Stock 25-Sep-2021

Coal is next Gold

There has been a lot of action in the power sector in recent days. Power companies are set to augment their production process to meet the greater power demand. Since 70 percent of the power is from thermal units, the demand for Coal is likely to increase. At the same time, the mines owned by Private Companies are falling short on their production, forcing ministry of mines to warn the captive coal companies to produce more coal to meet the growing demands from the power sector.

While the private companies are still struggling to improve their coal production, Coal India Limited (CIL), which has a near monopoly in this sector, is set to see an exponential growth in its business.

During 2014, in a hearing to the Coal Scam, the Honorable Supreme Court had ordered cancellation of all coal block allocations made over the last 10-15 years. The center had offered around 35 coal blocks in the first ever e-Auction held during 2015, in which the coal blocks went to private companies like GMR, Essar, Adani, JSW, Jindal, Balco, Hindalco like companies. These companies were to use these coal blocks for meeting power requirements for their own industrial needs.

In the recent review carried out by the ministry, it was revealed that many of these companies are falling radically behind the schedule of coal production. Hence, in spite of having their own coal mines, to meet their power requirement, these companies are depending on the Coal India. This has resulted shortage of coal in the country.

While these captive companies will work on augmentation of coal production process which will take significant time for them, Coal India will emerge as the sole gainer to this opportunity.

In recent few months, the Coal India stock price has registered up move and has made a recent high of 170. Analysis on the technical chart shows the stock has broken the 80 weeks high and set for a trend reversal.

In case the trend continues and looking to the recent developments in power sector, the price of Coal India is likely to touch T1 near 200 and after that it may test the T2 near 250 in the coming months.