Coal India Stock Faces More Rainy Days Ahead; Brokerages Slash Target Price
Coal India Ltd.’s rainy days are not over yet, according to top brokerages. JPMorgan and Jefferies reduced the target price for the stock after worse-than-expected performance in July–September.
Declining average selling price coupled with other expenses weighed on the Coal India’s second-quarter performance, according to JPMorgan. The largest coal producer has missed the brokerage’s estimates, it said in a note.
JPMorgan’s Revised Target Price
JPMorgan believes that the Coal India stock lacks catalyst so, it remained on the sideline for the stock. It reduced the target price to Rs 415 apiece from Rs 420 apiece. The current target price implies an 8% upside from the current levels.
Inventory levels at Coal India’s thermal power plants is higher than previous years’ levels. It is at 15 days compared to 12-to-seven days in 2023. Weak power demand is the key reason behind the high inventory levels, JPMorgan said in a note.
Thermal Coal Prices and E-Auction Prices
Thermal coal prices in the international markets are at $82 per ton, which indicates a 10% decline in the second quarter of financial year 2026. This indicated that there will likely be weakness in the e-auction prices could continue in the third quarter, JPMorgan said.
The brokerage also reduced the Ebitda estimates for Coal India by 1–2% in financial year 2026 and 2028. It has a neutral rating on the stock.
Q2 Results: Revenue and Profit Decline
Revenue fell 15.8% at Rs 30,187 crore versus Rs 35,842 crore. Ebitda fell 46.4% at Rs 6,716 crore versus Rs 12,521 crore. Margin at 22.2% versus 34.9%. Net Profit fell 50.2% at Rs 4,354 crore versus Rs 8,743.
Jefferies’ Revised Target Price and EPS Estimates
The second half of the financial year 2026 will likely remain weak for Coal India, Jefferies said. The brokerage cut the target price and earning-per-share estimates to factor in the lower volumes and higher costs.
It cut the EPS for financial years 2026 and 2028 by 10–12%. The brokerage has reduced the target price to Rs 430 apiece, from 455. The current target price implied a 12% upside from the current level.
Attractive Valuation and ‘Buy’ Rating
However, Jefferies retained a ‘Buy’ rating on the stock because of the attractive valuation. Its valuation is at 7.9 times of financial year price-to-earning and a 7% dividend yield.
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Impact on Indian Stock Market
The decline in Coal India’s stock price can have a ripple effect on the Indian stock market. Investors should keep an eye on the Nifty 50 index and Sensex index for any changes in the market trend.
Conclusion
In conclusion, Coal India’s Q2 performance was disappointing, and the revised target prices by JPMorgan and Jefferies reflect the challenges faced by the company. However, Jefferies’ ‘Buy’ rating suggests that the stock still has potential for growth. Investors should do their own research and consider their own risk tolerance before making any investment decisions. For more information on stock market analysis and investment strategies, you can visit our website.