Axis Securities, a brokerage, has upgraded Coal India Ltd (CIL) shares to purchase from maintain on macro tailwinds. Following the latest rise in coal costs attributable to geopolitical developments within the Middle East, economists have set a goal value of Rs 500.
Why Buy The Shares of Coal India?
As per Axis Securities, under are the 4 causes to purchase Coal India shares:
1. Power Demand Subdued So Far, however may Improve Going into the Summer Season: Power demand in fiscal YTD has remained subdued, staying nearly flat (+0.8% YoY progress). Power demand in Feb’26 confirmed reasonable progress of 1.1% YoY (down 6.9% MoM) at ~133 BU. The moderation in electrical energy demand up to now is pushed by the prolonged monsoon and cooler-thannormal temperatures (La Niña impression). However, the demand trajectory may see some restoration forward.
According to the World Meteorological Organization (WMO), the continued La Niña occasion is fading into ENSO (El Niño-Southern Oscillation) impartial situations, with mannequin forecasts indicating a rising chance of an El Niño episode creating later this 12 months (~40% by May-Jul’26).
Historically, El Niño situations are related to above-normal temperatures in India, amplifying cooling demand and driving energy consumption increased, a direct optimistic for coal-based thermal era and CIL’s offtake. With summer season 2026 approaching, and ENSO transitioning, we count on choose up in energy demand, offering a tailwind to CIL’s offtake volumes from Q1FY27 onwards.
2. Tighter Indonesian Coal Supply Boosts CIL Outlook: India is the biggest shopper of Indonesian thermal coal. However, Indonesia’s coal export quantity in CY25 fell by 3.7% YoY to ~391 MT, effectively under the federal government’s CY25 coal export goal of 650 MT.
For India, which has been a major importer of Indonesian thermal coal, tighter seaborne provide and better landed prices of imported coal straight enhance the competitiveness of CIL’s home coal, doubtlessly diverting incremental demand towards CIL. This is optimistic for CIL’s quantity and pricing outlook heading into FY27.
3. Natural gasoline costs elevated attributable to disruption within the Strait of Hormuz (by which ~20% of world oil and 30% of LNG strikes), which may disrupt gas-based energy era in India and can drive increased home coal demand.
4. CIL is anticipated to listing its subsidiaries – CMPDI by Mar’26 and MCL and SECL by the top of 2026, which may unlock some worth.
Coal Sector Outlook Turns Brighter As Global Supply Risks Mount
“Geopolitical events in the Middle East have resulted in an uptick in coal prices recently. While e-auction premiums have stabilised around 55-65%, they had spiked to 329% in Q2FY23 due to the impact of the Russia-Ukraine war. Higher international coal prices could pose upside to the e-auction premiums going forward. The possibility of a pick-up in power demand, lower exports from Indonesia, and higher natural gas prices could aid domestic volume growth,” commented the analysis analysts of Axis Securities.
“We raise our ASP by 2% each (we model higher e-auction prices for FY27/28E at Rs 2,750/t vs. our earlier assumption of Rs 2,500/t) for FY27/28 and marginally raise our FY27/28 sales volume by 0.5%/1% at 793/830MT, leading to EBITDA increase of 8%/9% for FY27/28,” analysis analysts additional added.
Lower-than-anticipated coal offtake and the higher-than-expected impression of the wage hike scheduled on July 26 would be the foremost threats to earnings progress of Coal India as per the brokerage.
Lower-than-anticipated coal offtake and the higher-than-expected impression of the wage hike scheduled on July 26 would be the foremost threats to earnings progress. The tentative offtake for CIL on February 26 was 62.0 MT, a slight drop of 1.5% YoY. Offtake totaled 674.6 MT from April to February 26, a 2.8% YoY drop. Lower public sale costs would possibly end result from a failure to broaden its demand for energy within the face of rising captive coal manufacturing, in keeping with Axis Securities.
Coal India Target Price
“We value the stock at 6.0x (from 5.5x) 1-year forward EV/EBITDA multiple (unchanged) on Mar’28E (from Dec’27E) Adj. EBITDA. Based on this, we arrive at a TP of Rs 500/share (Earlier TP: Rs 415/share), implying an upside of 12% from the CMP. Consequently, we upgrade the stock from HOLD to BUY rating,” commented the analysis analysts of Axis Securities.
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