Coal India Ltd. currently has an ambitious production target of one billion tonne by fiscal 2027. The company has also guided for 838 million tonne of production in fiscal 2025.
While the company's production has grown at a much higher rate compared to its historical average in the last two years, analysts believe that India's largest coal miner might have set the bar too high.
While the company's production has grown at a much higher rate compared to its historical average in the last two years, analysts believe that India's largest coal miner might have set the bar too high.
FY25 Production Guidance To Be Missed?
Coal India's production grew at an 11.5% compounded annual growth rate over fiscal 2022 to fiscal 2025, as per the company's data. The production in the first nine months of the current fiscal has remained muted at 543 million tonne. This marks only a 2% year-on-year growth.
Nuvama Research and Motilal Oswal Financial Services expect the company's total production to stand at 778 million tonne and 787 million tonne, respectively, in the ongoing fiscal. This stands 6% to 7% lower than the management guidance of 838 million tonne.
As per Parthiv Jhonsa, lead metal and mining analyst at Anand Rathi Institutional Equities, Coal India will only be able to clock production of 790-800 million tonne in fiscal 2025. The pressure of production would be on account of several headwinds faced for acquiring land, as well as obtaining environmental and other clearances.
FY27 Target May Get Pushed
JM Financial believes that Coal India can only hit its one billion tonne production target by fiscal 2030, and not by fiscal 2027. Nuvama Research expects the company to hit only 846 million tonne of production by fiscal 2027.
Rupesh Sankhe, vice president and power analyst at Elara Securities, notes that the company has set a difficult target given the lower power demand on slowing economic growth. While Sankhe expects power demand to grow at 7% CAGR till fiscal 2027, the coal requirement would be significantly lower than 1,000 million, or one billion, tonnes per annum.
Anand Rathi's Parthiv Jhonsa notes that the commencement of recently auctioned coal blocks to commercial and captive miners will put slight pressure on Coal India's target of one billion tonnes.
India's total coal production from captive and commercial mines from April to November 2024 grew 34.7% year-on-year, according to a government release. The growing traction of these mines is a direct loss of opportunity for Coal India, JM Financial stated.
While India's total power and thermal coal demand is expected to grow annually, Coal India does face various logistics challenges to transport coal, according to Jhonsa. The analyst also expects the company to push its production target of one billion tonne beyond fiscal 2027.
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