Coal India has recently experienced a noteworthy surge in its share price, primarily fueled by an 11% EBITDA growth in the fourth quarter, attributed to a decrease in employee costs. This development is especially remarkable given the 15% decline in its stock value over the past year and a lackluster performance during the first half. The pivotal question now is whether this robust Q4 performance can pave the way for a sustained rally in the stock. Many analysts are optimistic, forecasting significant potential for the stock’s appreciation in the future.
Brokerages Weigh In on Coal India’s Prospects
Several brokerage firms have released their insights regarding Coal India, painting a picture of cautious optimism.
Motilal Oswal’s Bullish Outlook
Motilal Oswal has reaffirmed its "Buy" rating for Coal India, setting a target price of Rs 480 per share, suggesting a potential upside of nearly 25% from current trading levels. They acknowledged the company’s positive Q4 results, especially after a sluggish first half. According to their report, “Although e-auction premiums softened in FY25, this was offset by improved e-auction volumes.” They believe that increasing the capacity of coal washers will enhance Coal India’s market share in both the coking and non-coking coal segments.
The report also emphasized the management’s strategic focus on expanding coal mines, which is expected to be financed through internal resources. For the fiscal years 2026 and 2027, they are maintaining their estimates, anticipating volume growth that would positively impact earnings. Notably, they predict that e-auction premiums could stabilize around 70% in the future.
Nuvama’s Cautious Stance
In contrast, Nuvama has assigned a hold rating to Coal India, setting a target price of Rs 405 per share, indicating limited upside potential. They recommend awaiting stronger volume growth before making any investment decisions. Nuvama highlighted that both coal prices and volumes have remained stagnant in the fourth quarter, and there are concerns about potential market share losses.
Interestingly, the company reported a 4% year-on-year increase in ex-employee costs to Rs 723 per ton, largely due to higher contractual obligations. On the other hand, the overall employee costs dropped by 11% year-on-year, thanks to a reduction in average manpower and lower performance-related expenditures.
A Dividend for Shareholders
In a positive development for investors, Coal India has declared a final dividend of Rs 5.15 per share. While the record date for this payout has yet to be announced, it is typically scheduled within 30 days of the stock going ex-dividend, ensuring shareholders are rewarded for their patience.
As Coal India navigates through these financial waters, both investors and analysts will be watching closely to see if the recent uptick signals a more extended period of growth for the company.
