According to the moneycontrol, India’s coal sector remains a cornerstone of its energy landscape, achieving a production of 411.62 million tonnes (MT) by September 2024, marking a 5.85% growth from the previous year. Coal India Limited, the largest producer, contributed 311 MT, underscoring the sector’s resilience amid challenges.
With a market capitalization of Rs 2.34 lakh crore, the shares of Coal India Limited closed at Rs 380.65 per share, decreased around 1.58 percent as compared to the previous closing price of Rs 386.75 apiece.
Sharekhan, one of the well-known brokerages in India, gave a ‘Buy’ call on the coal stock with a target price of Rs 560 apiece, indicating a potential upside of 47 percent from Thursday’s price of Rs 380 per share.
Here are rationale for bullish upside potential up to 46%:-
● Coal India Limited (CIL) experienced low volume growth in YTDFY2025, with Q1FY25 showing a 5.5% y-o-y increase, followed by a 1% decline in July-November due to weak power demand and heavy monsoons. However, coal demand is expected to rise with the end of monsoon and industrial growth.
● The government plans to add 80GW of thermal capacity by FY32, with over half already awarded and 8GW set to be added annually. This will drive strong coal demand, resulting in an expected 7-8% volume growth over the next few years.
● The company holds net cash of Rs. 49 per share (12% of market cap), expected to grow with strong volume growth. With a dividend yield of ~6% at the CMP, return ratios (RoCE/RoE) are projected to remain stable at over 30%.
● Coal India aims for net-zero emissions with 83MW of solar capacity installed by FY24 and an additional 213MW expected in FY25, targeting 3GW by FY28. The company is also developing a 2x800MW supercritical power plant through its subsidiary Mahanadi Basin Power Limited.
● CIL is advancing in coal-to-chemical projects with three coal gasification initiatives, partnering with BHEL for an Odisha project and GAIL for a West Bengal project. The company is also focused on reducing dependence on critical minerals like lithium and cobalt, actively pursuing acquisitions in India and abroad, including the Khattali Choti graphite block.
Financial Outlook:-
Looking into Coal India’s performance, revenue increased by 6.4 percent from Rs 32,776 crore in Q2FY24 to Rs 30,673 crore in Q4FY25. During the same period, net profit increased by 22 percent, from Rs 8,049 crore to Rs 6,275 crore.
Sector Outlook:-
Coal currently accounts for 55% of India’s total commercial energy production. While its share in the overall energy mix is expected to decline in the next decade, it will remain a primary energy source, with increased demand from sectors like power and steel driving higher coal offtake.
Industry estimates suggest India’s coal demand could reach 1,250-1,500 million tonnes by FY2030, assuming 6-8% power demand growth. This projection accounts for the expansion of renewable energy capacity to 500 GW by FY2030, up from 123 GW in FY2019, underscoring coal’s continued importance in India’s energy future.
Company Profile:-
Coal India Ltd’s primary business is coal mining and production, as well as the operation of coal washeries. The company’s key customers are the electricity and steel sectors. Other sector consumers include cement, fertilizers, brick kilns, and so on.
Written by :- Abhishek Singh
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