Analyst tracker: Brokerages turning bullish on Coal India stock on capex boost, power demand

coal demand in India is projected to sustain in both power and non-power sectors due to the renewable energy sector’s inadequate capacity to meet the energy demand and sustain high industrial activity, according to a recent JM Financial report.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Brokerage analysts are turning more bullish on Coal India on the back of continued power demand, capital investments and lack of renewable energy.

According to Moneycontrol’s Analyst Tracker as of January 1, out of the total of 23 analysts tracking Coal India, the number of ‘Buy’ calls has increased quarter-on-quarter to 18 from the previous 15. ‘Sell’ and ‘Hold’ calls on the coal stock have reduced to 1 and 4 ( from a previous 2 and 5), respectively. The average 12-month target price is Rs 355.68.

Also read: Coal India shares gain as Dec production increases 8.2%

Globally, the demand for coal is expected to reduce as more countries move to renewable energy. However, coal demand in India is projected to sustain in both power and non-power sectors due to the renewable energy sector’s inadequate capacity to meet the energy demand and sustain high industrial activity, according to a recent JM Financial report. This will benefit companies such as Coal India.

Coal India: Strong financials

Another reason for the rising analyst confidence in Coal India stock has been the Q2 financials. In Q2 FY24, Coal India reported a 13 percent year-on-year increase in consolidated net profit at Rs 6,814 crore, mainly due to power demand and output boost, along with a weak monsoon. Revenue for the same period also grew 10 percent year-on-year to Rs 32,776 crore.

Coal India stock call - ‘buy’; robust performance, valuation concerns may abate

ICICI Securities has a ‘buy’ call on Coal India, with a target price of Rs 395 at 8X FY25E. In a December 4 report, analysts said that Coal India’s November 2023 operating performance was robust with supplies to regulated and non-regulated sectors rising 5.8 percent YoY and 7.4 percent YoY, respectively.

Jefferies has a ‘buy’ call, with a revised target price of Rs 450. Analysts are positive on the stock as India's strong economic growth outlook and rising power consumption could drive 6 percent volume CAGR for Coal India over the FY24-26E period. While the P/E ratio has contracted from an average 13x over 2011-18 to 6.5x over 2019-23, partly due to ESG concerns on coal, Jefferies say that the concerns may abate amid rising power demand in India.

An increased focus on capex could also be driving growth. Motilal Oswal analysts believe that Coal India’s intensified focus on capex will improve its power evacuation infrastructure. “Capex, which used to hover around Rs 65-85 billion until FY2020, tripled in FY2023 to Rs 186 billion. Over the last three years, capex has exceeded budget estimates.”

In November 2023, analysts at Axis Securities (Buy with a revised target price of Rs 380) revised their EBITDA upwards for FY24/25E to account for strong Q2FY24 results. Axis values the stock at 4.5x 1-year forward EV/EBITDA multiple on FY25E Adj. EBITDA (from 4.0x) on higher production and demand visibility.

Also read: Jefferies raises target price on Coal India, JSW Steel, Tata Steel, Hindalco; bullish on Indian metals

Most analysts believe that the recent surge in international coal prices could help support recovery in e-auction prices, resulting in better profitability. “Higher e-auction premium (80 percent from the previous 50 percent) and higher volume growth from NPS bode well for blended coal realisation. This coupled with cost-control initiatives (lower employee count by 5 percent annually and closure of non-profitable underground mines) would drive margin improvement for Coal India,” analysts at Sharekhan said.

Move towards renewables

Recently, the government has also been advising CPSEs in the coal mining sector to plan for expansion of renewable resources. According to PIB, around 1600 MW renewable capacity has already been created (Coal India, NLC India and SCCL) with around 1,769 MW being awarded for the FY2024. The report adds that an additional 2,553 MW capacity is scheduled to be awarded in the FY2024.

Coal India stock performance

Over the last six months, Coal India stock has gained over 67 percent and was at Rs 387.40 at close on January 1. According to analysts, key risks for the stock could be international coal prices and any impact on e-auction premiums going ahead.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.