Shares of state-owned Coal India Ltd. (CIL) experienced a notable rise in early trading on Wednesday, climbing as much as 4.17 percent to reach Rs 419.30. This upward movement followed an announcement from Nuvama Institutional Equities, which upgraded its rating on the coal producer to 'Hold' and simultaneously raised its target price.
Nuvama's revised target price for CIL is now Rs 454, up from the previous Rs 396. This adjustment is based on a valuation of 5 times FY28E enterprise value-to-EBITDA (EV/EBITDA).
Why the Upgrade? Nuvama's Outlook
The domestic brokerage cited several factors contributing to its optimistic outlook for Coal India. Nuvama anticipates a recovery in the company's coal volumes in the coming months. This expectation is underpinned by robust thermal power generation demand, ongoing inventory restocking efforts at power plants across the country, and a reduction in coal imports. Additionally, Nuvama noted the consistent market share maintained by captive coal producers.
Data for April-August 2026 showed a 6.7 percent year-on-year increase in Coal India's volumes, albeit from a lower base. Looking ahead, Nuvama projects CIL's volumes to rise approximately 8 percent during September–March 2027. This anticipated growth is expected to meet both restocking requirements and actual demand from power plants.
Financial Projections and Earnings Boost
Consequently, Nuvama has increased its volume estimates for FY27E and FY28E by 1.9 percent each, setting them at 793 million tonnes and 825 million tonnes, respectively. This implies a 5 percent compound annual growth rate (CAGR) for volumes over FY26–28E.
The brokerage further expects that higher volumes combined with improved e-auction prices will significantly bolster CIL's earnings in the second half of FY27. Reflecting these revised projections, Nuvama has increased its EBITDA estimates for FY27 and FY28 by 13 percent and 8 percent, respectively.
Coal India, as the nation's largest coal producer, plays a critical role in India's energy sector, supplying coal primarily to the power industry.