Coal India Targeted at Rs 515 by Prabhudas Lilladher
Coal India's Performance Reflects Inventory Reduction and Improved Demand-Supply Balance
Coal India's research report by Prabhudas Lilladher highlights a soft performance in April 2026, with production declining by 10% year-over-year (YoY) and offtake decreasing by 2% YoY. This decline is attributed to inventory reduction, which has supported the company's working capital and cash flows. As of March 2026, inventory levels stood at approximately 130 million metric tons (mt), a decrease from the year-ago level of around 107mt.
The e-auction premiums remained strong in April 2026, averaging around 51% over notified prices. This is a significant increase from the 45% observed in March 2026 and 35% in February 2026. This strength in premiums reflects firm spot demand and is supported by higher import parity. In April 2026, Indonesian coal with a calorific value of 6332 kcal/kg was priced at around US$103 per ton, a 2% increase from the previous month.
Downstream inventory trends have shown improvement, with power plant coal stocks declining year-over-year to 54mt, marking the first drop in approximately 28 months. This indicates a better demand-supply balance. However, the number of plants with critical inventory, defined as coal stocks of less than 7 days, rose slightly to 23, up from 21 in the previous year. This suggests some tightening in the market.
Valuation Remains Reasonable
Despite the soft performance in April 2026, valuation remains reasonable for Coal India. The company's Enterprise Value to Earnings Before Interest, Tax, Depreciation, and Amortization (EV/EBITDA) ratio stands at around 5.5x, with a dividend yield of approximately 6%. The base case target price (TP) for the company is INR515, based on historical valuation, with an upside potential of INR556 at an EV/EBITDA multiple of 6.
Outlook and Recommendations
For the fiscal year 2027-28, Prabhudas Lilladher models modest volume growth of 2/3% YoY and EBITDA (ex-OBR) growth of 16%/7% YoY, respectively. The research report highlights that Coal India remains well-positioned to benefit from sustained strength in power demand, with around 80% of its volumes linked to coal-based power generation.
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| Financial Metric | FY27E | FY28E | YoY Growth |
|---|---|---|---|
| Volume Growth (YoY) | 2.3% | 3.2% | - |
| EBITDA (ex-OBR) Growth (YoY) | 16.1% | 7.2% | - |
Investor Takeaway
Investors should consider Coal India as a potential target at Rs 515 based on reasonable valuation and modest growth prospects.
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