State-owned coal producer Coal India Ltd (CIL) has received a significant rating upgrade from Equirus Securities, which moved its recommendation on the stock from 'Reduce' to 'Add'. This positive revision comes with a new target price of Rs 450, based on a valuation of five times one-year forward EV/EBITDA, set for December 2027.
Equirus highlighted that while CIL's production saw a 4.5 per cent year-on-year (YoY) decline to 267.5 million tonnes (mt) during the first five months of fiscal year 2027 (5MFY27), dispatches increased by 6.7 per cent YoY to 322.9 mt. This disparity led to a substantial drawdown in pithead inventories, signaling tighter market conditions.
Brokerage Insights and Market Outlook
The brokerage anticipates that the tightening domestic coal availability will significantly bolster e-auction premiums in the coming months. Equirus projects these premiums could escalate from the current 45-50 per cent to a range of 75-80 per cent or even higher, creating a substantial upside risk to CIL's future earnings. This outlook is further supported by a 9.9 per cent YoY increase in thermal power generation during 5MFY27, coupled with a decline in power plant coal inventories to approximately 23 mt (around 8 days' supply).
Nuvama Institutional Equities' View
Separately, Nuvama Institutional Equities also recently upgraded Coal India, moving its rating to 'Hold' and raising its target price to Rs 454 from Rs 396. Nuvama expects CIL's volumes to recover robustly in the coming months, driven by strong thermal power generation, the necessity for power plants to restock inventories, reduced coal imports, and a stable market share for captive coal producers.
Nuvama noted that CIL's coal volume increased by 6.7 per cent YoY between April and August 2026, acknowledging this growth occurred on a low base. The firm projects CIL's volumes to rise approximately 8 per cent from September 2026 to March 2027 to meet restocking demands and actual power plant requirements. Consequently, Nuvama has increased its FY27E/28E volume estimates by 1.9 per cent each, to 793mt/825mt, representing a 5 per cent volume CAGR over FY26–28E. Nuvama's revised target price is based on five times FY28E enterprise value-to-EBITDA (EV/EBITDA).
As of the latest market close, CIL shares were trading marginally higher at Rs 432.85.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.