Coal India Shares Downgraded To 'Hold' By Systematix Post Q1 Results — Check Target Price
Lower offtake and steep fall in e-auction premiums are key risks for Coal India, hence Systematix downgrades to Hold rating.
(photo: Albert Hyseni/ Unsplash)
Captive coal mining and rising share of RE in the power mix have most likely altered India’s coal consumption dynamics, which has been negative for Coal India, in the brokerage's view.
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Systematix Report
Coal India Ltd. offtake has followed a downward trajectory over the last few quarters, preventing stock re-rating from current levels of 4.7x/4.5x FY26/FY27 EV/Ebitda. The stock traded 5-5.5x EV/Ebitda during FY22-FY24 supported by 9% volume CAGR during the period.
In contrast, FY25 volumes were flat YoY followed by a 4% decline in Q1 FY26. Over the April-July period this year, offtake has fallen by 6% YoY. The company remains far behind its target to reach 1-billion-ton annual production number, last guided to be achieved by FY27.
Captive coal mining and rising share of RE in the power mix have most likely altered India’s coal consumption dynamics, which has been negative for Coal India, in our view.
We lower Coal India’s sales volume growth assumptions, factoring in 3% YoY decline in FY26 followed by 1% growth in FY27. Basis these assumptions, we revise our FY26/FY27 Ebitda lower by 10%/9% and value COAL 4.5x FY27E EV/Ebitda, arriving at a revised target price of Rs 371/share, and downgrade stock rating to Hold.
Lower offtake and steep fall in e-auction premiums are key risks for the company. Downgrade to Hold.
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