Buy Coal India Ltd for the Target Rs.480 by Motilal Oswal Financial Services Ltd
In-line performance
* 1QFY26 revenue came in at INR358b (-2% YoY and -5% QoQ) against our est. of INR372b.
* Adj. EBITDA (excluding OBR exp) stood at INR111b (-4% YoY and -1% QoQ) against our estimate of INR115b.
* EBITDA/t stood at INR582 (flat YoY and +4% QoQ) vs. our est. of INR600/t.
* APAT at INR87b (-20% YoY and -9% QoQ) was in line with our est.
* The company declared an interim dividend of INR5.5per share in 1Q.
* Production stood at 183.3mt (-3 YoY and -23% QoQ) and Offtake stood at 190.6mt (-4% YoY and -5% QoQ).
* FSA revenue stood at INR257b (-2% YoY) with a volume of 166mt (-4% YoY) and ASP of INR1,550/t (+2% YoY) during the quarter.
* E-auction revenue came in at INR49.7b (-11% YoY), volume stood at 21.3mt (-8% YoY) and realization at INR2,332/t (-3% YoY), translating into 50% premium (~58% in 1QFY25) during the quarter.
* In May’25, COAL signed an MoU with UPRVUNL for setting up a 500MW solar power project in Uttar Pradesh as part of green and renewable energy initiatives.
* A new mine Kotre-Basant Pur in CCL has started its operations w.e.f. 15th Apr’25 under MDO mode with a capacity of 5mtpa.
* On 30th Jun’25, the company signed an MoU with Hindustan Copper to collaborate in copper and critical minerals sectors.
Valuation and view
* COAL delivered in-line performance in 1QFY26 as muted volume was offset by better realization. E-auction volumes accounted for ~11% of total volumes, with e-auction premium of 50% supporting the profitability.
* For FY26/FY27, we largely maintain our estimates and expect volumes to improve, which would boost earnings performance. The e-auction premium is expected to be at 70% going ahead.
* We expect COAL to clock an 8% volume CAGR during FY26-27. This would translate into a CAGR of 10% in revenue and 14% in EBITDA.
* The company’s focus on increasing coal-washer capacity will improve its market share in domestic coking/non-coking coal. Further, management is focusing on coalmine expansions, which would be funded via internal accruals, or COAL might borrow to undertake certain strategic diversification projects, such as RE facilities and coal gasification, etc.
* At CMP, the stock is trading at 3.3x FY27E EV/EBITDA. We reiterate our BUY rating with a TP of INR480 (premised on 4.5x on FY27E EV/EBITDA).
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