Coal India Ltd.'s production may have slipped 6% year-on-year in August, but the output fall did not hog the spotlight because a host of factors support the coal manufacturer's case.
Brokerages have remained largely bullish on the company, accounting for higher offtake or coal movement amid improving supply for the power sector, a strong e-auction premium for the month of August, and falling inventories.
"Coal supplies to the power sector improved 4% YoY to 48.5mt (supported by 13% YoY growth in India power demand) while the same to the non-regulated sector improved 10% YoY to 12.1mt," UBS said in its note. The brokerage has maintained a 'buy' rating on the stock along with a price target of Rs 550.
Coal India sold coal at an average premium of 59% over the notified price under its e-auction in August 2026, higher than the 46% average premium recorded during the first five months of the current fiscal, as per provisional miner data.
At the same time, UBS flagged decrease in Coal's production by 6% year-on-year in August and 5% in the first five months of fiscal year 2027.
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HSBC also noted strong volume growth in August, and highlighted that dispatch growth "finally" picked up after 2 years of weakness, while maintaining a 'hold rating with Rs 440 as the price target.
"August off take growth is impressive given the higher base of last year. Given the strong power demand, low inventories and higher thermal generation, we expect offtake growth to remain strong in the near term," the brokerage underlined.
The brokerage also expects e-auction premiums to remain high in the near-term, backed by coal inventories (pithead+power plants) declining to 3 year-lows amid sharply higher regional coal prices and a seasonally strong period.
"We see E auction prices for Coal India moving higher in the near term, as we enter the seasonally strong period of industrial activity and power demand post the festivals," the brokerage said.
Morgan Stanley also expects e-auction premiums to remain elevated in the near term, supported by higher global thermal coal prices and maintained an Equal-weight rating on Coal India with a target price of Rs 420.
Notably, Nuvama has upgraded Coal India to “Hold” and raised its target price to Rs 454 from Rs 396, citing expectations of volume recovery as power generation rises and coal imports remain subdued.
The brokerage raised its FY27E/FY28E Ebitda estimates by 13%/8%, but expects higher employee costs from wage revisions to weigh on profitability from FY28. Gasification, power and critical minerals remain long-term opportunities, with benefits likely in four-five years.
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