Booming Indian coal demand powers rise of state-run giants

Korea Electric Power

14/12/2023 05:42

By Sudarshan Varadhan
       SINGAPORE, Dec 14 (Reuters) - Booming demand for Indian
coal is driving up the shares of miner Coal India  COAL.NS  and
power generator NTPC Ltd  NTPC.NS ,  state giants investors once
dismissed as plodding dinosaurs, but which are now outperforming
the wider market and global peers. 
    NTPC, which produces mostly coal-fired power, has surged
78%, far ahead of a gain of 17% in the broader Nifty Index,
while shares of Coal India are up 55% for their best year in
2023.
    Already the most coal-dependent major economy, India's
reliance on the fuel for power generation is set to rise for a
third straight year as the addition of renewables slows, giving
the two giants a boost.
    Analysts expect their efforts to boost efficiency and access
to cheap capital to extend the rally, with most recommending
that shareholders buy more of the two stocks or retain their
holdings, LSEG data shows.
    By comparison, shares of coal miners elsewhere, such as
Indonesia's Adaro Energy  ADRO.JK , Australia's Whitehaven Coal
 WHC.AX  and U.S.-based Peabody  BTU.N  plummeted this year.
Shares of China Shenhua  601088.SS  and China Coal Energy
 601898.SS  rose, but less than the Indian companies.
    Among coal-fired power generators, South Korea's KEPCO,
U.S.-based Duke Energy  DUK.N  and American Electric Power
 AEP.O  suffered sharp declines. Russia's Inter RAO shares rose
16.2%.
    Still, with a price to earnings ratio of 7.63, Coal India is
cheaper than major Chinese peers, and NTPC is undervalued,
compared with many Chinese and American counterparts.
        Foreign funds have been boosting their stakes, despite
tougher global environmental, social and governance (ESG) norms
for institutional investors.
    NTPC investors include the asset management units of Goldman
Sachs and Nippon Life, Vanguard and Blackrock, while Fidelity,
Mellon Investments and Charles Schwab figure among Coal India's
top 20 shareholders, LSEG data showed.
    "Foreign shareholding in the company has steadily moved
higher over the last two years, highlighting the dialing-down of
the ESG discount," JPMorgan said in an August note on Coal
India.
    Both companies were long seen as dividend stocks.
    Of the eight years of growth the Nifty saw in the last
decade, Coal India and NTPC outperformed it just once each. Coal
India lost 57% of its value in the decade through 2020, while
NTPC lost more than a third. 
    Since 2021, NTPC has tripled in value to $34 billion, while
the world's largest coal miner has grown 2.5 times to $26
billion.
    In an October note titled, "This elephant can dance,"
Bobcaps said NTPC's lower cost of debt gave it an edge in the
power industry and it stood to benefit from the government's
view that thermal additions were key to stability.
    NTPC, the only major Indian company still adding coal-fired
capacity, is also boosting coal output from its own mines, while
Coal India is slashing thousands of jobs a year and outsourcing
some operations to boost margins.
    While most of the miner's sales are on low-margin, long-term
contracts to utilities, surplus output has allowed bigger spot
sales in the lucrative auction market. By comparison, tightening
funding has choked global coal miners. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Coal India, NTPC profits grow at record pace Coal India, NTPC
profits grow at record pace    https://tmsnrt.rs/48eBaCV
NTPC cheaper than local and foreign peers    https://tmsnrt.rs/3GHW0il
Coal India undervalued compared to Chinese miners    https://tmsnrt.rs/47WoiSf
Return of the dinosaurs: NTPC, Coal India outperform Nifty    https://tmsnrt.rs/3tiBlhU
NTPC bucks global trends in 2023    https://tmsnrt.rs/3tqfDZf
Coal India bucks global trends, shares grow at record pace    https://tmsnrt.rs/3Nps5iR
Analysts bullish on prospects for Coal India, NTPC    https://tmsnrt.rs/3NqvFcw
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Sudarshan Varadhan; Editing by Tony Munroe and
Clarence Fernandez)
 ((sudarshan.Varadhan@thomsonreuters.com; +65 91164984; Twitter:
https://twitter.com/sudvaradhan @sudvaradhan;))