Coal India shares fall 4% after Q2 results; brokerages flag cost pressures, weak EBITDA, check target prices

At close, Coal India shares settled 1.03 percent lower at Rs 389.45, against the previous close of Rs 393.50. Coal India Q2 results Coal India posted a 57 percent year-on-year (YoY) increase in consolidated net profit to Rs 6,547 crore for the September quarter, aided by higher revenues from product sales. It stood at Rs 4,167 crore in the year-ago period. Consolidated revenue from operations rose 20.8 per cent to Rs 44,179 crore in the second quarter.

Total income also increased 21 percent YoY to Rs 46,833 crore in Q2 FY27 from Rs 38,694 crore in the same quarter the previous financial year. CIL registered a capex of Rs 7,965.67 crore in the first half of the ongoing financial year, reflecting continued focus on investment and growth initiatives. The company produced 321 million tonnes (MT) of coal in the April-September period of the current fiscal year, compared with 329.14 MT of coal produced in the first half of the previous fiscal year.

Coal offtake, or the total volume of produced coal delivered or dispatched from mines to customers, increased to 384.20 MT in the first half of the current fiscal, up from 357.05 MT in the corresponding period of the previous fiscal. Brokerages on Coal India Share Price: Buy, sell or Hold? Brokerages largely maintained positive outlook for Coal India, citing attractive valuation, dividend potential and long-term volume prospects of the state-owned coal producer.

However, higher operating expenses and weaker-than-expected EBITDA prompted some brokerages to highlight near-term risks to earnings. Elara Securities on Coal India: Buy, target price Rs 522 with 33% upside Brokerage Elara Securities retained its ‘Buy’ rating on Coal India with an unchanged target price of Rs 522, implying an upside of around 33 percent from the stock’s recent trading level, describing the company’s Q2 FY27 performance was broadly in line with its estimates, with revenue from operations increasing 20.9 percent year-on-year to Rs 44,170 crore and reported profit after tax rising 57.1 percent to Rs 6,500 crore.

EBITDA increased 28.9 percent year-on-year to Rs 8,490 crore. Production rose 4 percent to 151.37 MT, while offtake grew 12 percent to 186.34 MT. Elara highlighted the improvement in sales volumes and realisations, aided by 12 percent growth in FSA volumes and 51 percent increase in e-auction volumes. Overall sales realisation increased 7 percent year-on-year to Rs 2,346.21 per tonne. The brokerage also pointed to Coal India's diversification initiatives, including the commissioning of 200 MW of solar capacity at its Khavda project in Gujarat, the commencement of operations at the Bhojudih coal washery and investments in overseas critical-mineral opportunities.

Elara maintained its positive view, citing improved coal evacuation infrastructure, a healthy balance sheet and the potential for annual dividend payments of Rs 26-27 per share. The brokerage also revised its earnings estimates by around 4 percent for FY27 and by over 1.1 percent and over 1.9 percent for FY28 and FY29, respectively. Equirus Securities on Coal India: Add, target price Rs 450 Equirus Securities retained its ‘Add’ rating on Coal India, with a target price of Rs 450, while keeping the recommendation under review.

The brokerage stated Coal India reported 2Q FY27 adjusted EBITDA at Rs 73.9 billion (+29% yoy, -28% qoq), 30% below its estimates. Higher than expected costs across all line items drove the miss. Coal production increased 3.8 percent year-on-year to 151.4 MT, while dispatches rose 12.2 percent to 186.3 MT. E-auction volumes jumped 50.6 percent to 22.8 MT, although they remained below the brokerage's expectations.

Realisation trends were mixed with CIL’s blended realisations increasing 1.4 percent QoQ to Rs 2,371 per tonne, while e-auction realisations remain flat at Rs 3,082 per tonne. he e-auction premium over FSA realisations, excluding other charges, stood at 51.3%, below expectations. Equirus said unit costs rose 6.4 percent year-on-year to Rs 1,974 per tonne, driven by higher input costs, employee expenses and other operating expenses.

JM Financial on Coal India share: Add, Target Price 438 JM Financial retained its ‘Add’ recommendation on Coal India but reduced its target price to Rs 438 from Rs 458 earlier. The brokerage noted that revenue for Q2 FY27 stood at Rs 442 billion, up 21 percent YoY but down 4 percent sequentially. Core revenue from coal sales increased 20 percent year-on-year to Rs 307 billion. However, EBITDA per tonne was weaker than expected, primarily due to an increase in inventory accumulation as the company liquidated its stock.

Production and dispatches rose 4% and 12% year-on-year, respectively, to 151 MT and 186 MT. “We continue to believe in gradual reduction of thermal PLF, rise of captive mining and moderating/stable e-auction prices, which will limit the company’s performance momentum in the next few years,” it said. Motilal Oswal on Coal India share: Buy, Target price 450 with upside potential of 14% Domestic brokerage Motilal Oswal maintained its ‘Buy’ rating on Coal India with a target price of Rs 450, implying an upside of 13 percnet.

The brokerage said the company delivered a weak performance, with revenue remaining steady but operating earnings falling short of estimates, primarily due to higher production costs. It lowered its FY27 EBITDA estimate by 5 percent to account for the quarterly earnings miss but expects volumes to recover in the second half and costs to stabilise. The brokerage expects Coal India to post a 3-4% volume compound annual growth rate over FY26-FY28, with a higher share of washed coal and e-auction sales supporting realisations and margins.

It also highlighted the company's diversification into renewable energy, iron ore mining and overseas critical-mineral assets as potential long-term growth drivers. “We expect COAL to post a 3-4% volume CAGR over FY26-28E, while a higher share of washed coal and e-auction sales will support overall NSR and margins. This could translate into a revenue/EBITDA CAGR of 4%/9% over FY26-28E,” it said. Over the longer term, the company plans to increase its coal-washer capacity to raise the VAP share, supporting margins. “It is also reducing its dependence on coal by expanding into renewable power, iron ore mining, and overseas critical mineral assets,” it added.