Coal India shares fall 3% after Q2 results; Jefferies, Motilal Oswal, others cut target price

ETMarkets.com

Revenue from operations rose 21% to Rs 44,179 crore from Rs 36,553 crore a year earlier, driven by higher revenue from product sales. Total income also increased 21% year-on-year to Rs 46,833 crore from Rs 38,694 crore.

Buy, sell or hold Coal India shares?

International brokerage Jefferies cut the Coal India target price to Rs 460 from Rs 500, implying an upside of 17% from current market levels. Coal inventories at power plants have declined to a multi-year low of just 6 days, well below the last 10-year average of 15 days.”Historically, periods of low inventory have typically been followed by strong dispatch growth for Coal over the subsequent six months as power generators replenish stocks,” the brokerage said in a note.

With inventories currently well below normal levels, restocking demand provides a tailwind for COAL's volumes ahead. Jefferies factors in 8% YoY growth in Coal India’s dispatch volumes in FY27, followed by 5% CAGR over FY27-29E.

Jefferies expects Coal India’s earnings trajectory to improve, supported by a recovery in global thermal coal prices. International thermal coal prices, which remained range-bound at 95-115 between January 2025 and February 2026, have since surged 31% to $152 at spot. Sustained strength in global prices is expected to support domestic e-auction realisations. Jefferies' estimates for the second half of FY27 through FY29 factor in e-auction prices of Rs 3,100-3,200, compared with Rs 2,962 in FY26 and Rs 3,084 in the first half of FY27.

After a 12% decline in EPS over FY24-26, Jefferies expects Coal India's earnings to recover, projecting a 7% CAGR in EPS over FY26-29. The stock is trading at 8x one-year forward adjusted P/E, excluding stripping activity adjustments, below its long-term average of 9x, and offers a dividend yield of 7%.

JM Financial also cut the target price to Rs 438 from Rs 458, forecasting an upside of 11.5% from current levels. “We continue to believe in gradual reduction of thermal PLF, rise of captive mining and moderating/stable e-auction prices, which will limit the company’s performance momentum in the next few years,” the brokerage said.

Motilal Oswal has maintained its Buy rating on Coal India with a target price of Rs 450, implying an upside of 13%. The brokerage said the company delivered a weak performance, with revenue remaining steady but operating earnings falling short of estimates, primarily due to higher production costs. It has cut its FY27 EBITDA estimate by 5% to factor in the quarterly earnings miss. However, it expects volumes to rebound strongly in the second half and costs to stabilise, putting earnings back on track. Its FY28 estimates remain unchanged.

Motilal Oswal expects Coal India to register a volume CAGR of 3-4% over FY26-28E. A higher contribution from washed coal and e-auction sales is expected to support net sales realisations (NSR) and margins, translating into revenue and EBITDA CAGRs of 4% and 9%, respectively, over the same period.

Over the longer term, the company plans to expand its coal-washer capacity to increase the share of value-added products (VAP), supporting margins. It is also looking to diversify beyond coal by expanding into renewable power, iron ore mining and overseas critical mineral assets.