Whalesbook
Geojit Financial Services has upgraded Coal India Ltd. (CIL) to a BUY rating, setting a price target of Rs. 506 per share. This valuation is based on a projected 6.3 times FY28 estimated earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple, indicating analyst expectations for future growth.
Coal India's Q3 FY26 results showed consolidated revenue dropped 5.2% year-on-year to Rs. 34,924 crore. This decline was driven by lower coal offtake volumes and reduced e-auction prices, partially offset by improved Fuel Supply Agreement (FSA) rates which rose to Rs. 1,505 per tonne from Rs. 1,435 per tonne.
EBITDA fell 24.2% year-on-year to Rs. 9,331 crore, with EBITDA margins narrowing by 670 basis points to 26.7%. This margin compression was largely due to a 21.8% increase in employee benefit expenses following recent wage agreements, and a 75.3% jump in stripping activity adjustments which reflect increased overburden removal costs.
Despite these cost pressures, Coal India is pursuing an ambitious production target of 1 billion tonnes annually by FY28-29, a significant increase from its FY25 output of 781 million tonnes. This expansion is critical for meeting India's energy demands, with government policies actively supporting domestic coal production to reduce import reliance.
However, significant risks remain, including the persistent impact of higher employee and stripping costs on margins. Coal India also faces environmental, social, and governance (ESG) scrutiny inherent in coal mining. While India's energy policy supports domestic coal, global shifts towards cleaner energy could introduce long-term demand uncertainties. Analyst sentiment is mixed, with price targets generally ranging between Rs. 450 and Rs. 520, reflecting both the company's importance in energy security and its associated challenges.