Broker’s call: Coal India (Buy)

Target: ₹545

CMP: ₹476.65

With dispatches of nearly 838 million tonnes expected in FY25 and about 900 million in FY26, Coal India offers healthy volume assurance, driven by mounting coal demand by the power sector. The focus on ramping up of FSA and eauction volumes, along with cost-saving steps, evacuation and infrastructure-improvement projects would drive the company’s performance.

We expect over 108m/120m tonnes of sales via auctiondetermined prices in FY25/26. E-auction premiums, now at 50 per cent are expected to be 55-59 per cent over FY25-26. Over the last three years, the company intensified its capex (₹34,000 crore likely over the next two years). Higher capex would pave the way for 1 bn tonnes of production over 2-3 years.

Over the last four years, the company has been spending increasingly on capex (over ₹64,000 crore). It has been relentlessly investing in land, increasing Railways capacity, undertaking first-mile connectivity (FMC) projects, setting up washeries, enhancing machinery, etc., which would eventually help it ramp up seamlessly to 1bn tonnes of production.

Considering the company’s focus on ramping up volumes, cost-control steps, investor-friendly dividend policy, strong balance sheet and robust power demand, we retain our Buy, at a 12-month target price of ₹545, 6x FY26e EV/EBITDA.

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