Coal India's Q2FY26 Earnings Miss Expectations Amidst Rising Costs and Muted Volumes; Analysts Divided

Coal India Limited's performance in the September quarter of FY26 (Q2FY26) failed to impress analysts. The company posted an Ebitda of ₹5,850 crore, a 24% decline year-on-year, attributed to increased operating costs (CoP) and lower credit from stripping activity adjustments. Ebitda per tonne also fell significantly.

Volume growth has been a concern, with H1FY26 volumes down approximately 3% year-on-year, influenced by subdued power demand and heightened competition from captive coal miners. Nuvama Institutional Equities trimmed its Ebitda estimates for FY26 and FY27, maintaining a 'Reduce' rating with a target price of ₹375, though it highlighted an attractive dividend yield of around 6.5%.

Motilal Oswal, however, maintained its 'Buy' rating with a target price of ₹440. Despite acknowledging a 'big miss' due to high costs, the brokerage sees recovery prospects in the second half of FY26, supported by potential improvements in e-auction volumes and premiums. They project a moderate volume, revenue, and Ebitda compound annual growth rate (CAGR) over FY25-28.

Emkay Global Financial Services also noted weaker-than-expected results, with production and offtake declining. They maintained an 'Add' rating and revised their target price to ₹400, citing medium-term support from capacity expansion plans but cautioning about near-term pressures.

Impact: This news indicates potential near-term pressure on Coal India's stock price due to cost headwinds and volume concerns. However, the differing analyst views highlight a divergence in expectations, with some betting on a recovery driven by strategic plans and demand shifts. The stock's valuation and dividend yield are key factors for investors. Rating: 7/10

Difficult Terms: Ebitda: Earnings Before Interest, Tax, Depreciation, and Amortisation. A measure of a company's operating performance. CoP: Cost of Production. The total cost incurred to produce goods or services. Stripping Activity: In mining, it refers to the removal of overburden (soil and rock) to access the mineral deposit. CAGR: Compound Annual Growth Rate. The average annual growth rate of an investment over a specified period longer than one year. EV/Ebitda: Enterprise Value to Earnings Before Interest, Tax, Depreciation, and Amortisation. A valuation multiple. FSA: Fuel Supply Agreement. A contract between a fuel supplier and a buyer. E-auction: Electronic auction, a method of selling goods or services online. APAT: Adjusted Profit After Tax. Net profit adjusted for certain extraordinary or non-recurring items.