Coal India Cut To 'Hold' By JM Financial As Headwinds Weigh On Production
The brokerage cut the target price to Rs 362 per share versus Rs 601 apiece earlier.
The shares of state-owned Coal India Ltd. were downgraded to 'hold' by JM Financial with nearly a 40% cut in its target, citing a "gradual and steady" decline in earnings.
The brokerage cut the target price to Rs 362 per share versus Rs 601 apiece earlier. The current target is equal to the value of shares on Monday's close.
The steady change in production mix towards inferior coal, unlikely success in substitution of imported coal and lack of any meaningful impact from new thermal power plants are likely to limit the performance momentum in the next few years, the brokerage said.
Coal India’s earnings will experience a gradual and steady decline due to both internal and external structural changes until diversification efforts achieve significant scale, JM Financial said.
After showing remarkable performance, the coal producer has now set an aspiration to reach 1 billion tonnes of production by fiscal 2027, which JM Financial believes will happen by the financial year 2030. The earnings per share was cut by 9-13% for fiscal 2025-27 from their earlier estimates.
In September 2023, JM Financial said “King coal is coming back." However, "since then much water has flown under the bridge," it said in the latest report on Jan. 13.
The tense geopolitical landscape, renewable energy generation outstripping demand growth, and thermal capacity expansion for energy security are back on the table but with reduced utilisation rates, it said.
Shares of Coal India have fallen 5.65% during the last 12 months. The relative strength index was at 26, implying that the stock is oversold.
Nineteen out of the 25 analysts tracking the company have a 'buy' rating on the stock, four suggest a 'hold' and two have a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 39%.
