Maintain 'reduce' on Coal India – TP Rs.260 - Geojit BNP Paribas Financial Services Limited

The government is reviewing Coal India's new prices. Price increase may be allowed up to the wage hike. This means, a partial rollback in price. 10-11% price hike may be allowed, which is sufficient to absorb the effect of wage hike. Any further price hike is ruled out after the wage hikes are settled.

It seems that about 25% price hike may be needed to turn the outlook on the stock positive, but such chances are remote.

At the current price, the stock appears overvalued. However, the price may sustain in the near term in anticipation of higher dividend (if mandated by government). However, concern prevails on fundamentals.

Rising competition is another risk in the stock with the potential opening up of coal mining to the private sector.

Source : Equity Bulls

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