Coal India has faced two difficult years with earnings declining and dispatch growth slowing sharply. Jefferies believes the pressure may now ease over the next two financial years. The brokerage has kept its Buy rating on the company and increased the price target to Rs 485 from Rs 450 with an 11% upside based on Jefferies estimates.
Jefferies has also increased its earnings per share estimates by 1- 4% for FY26-FY28. The brokerage said improving electricity demand, stronger global coal prices and steady domestic consumption could support earnings growth ahead.
Here are the main takeaways from Jefferies on the company’s business fundamentals
Jefferies on Coal India: Earnings fell sharply in the last two years but Jefferies expects growth to return
Coal India’s profit trajectory weakened during the past two financial years as dispatch volumes slowed and auction premiums declined.
Jefferies estimates earnings per share declined 21% between FY24- FY26 estimated. The brokerage attributes the decline mainly to softer volumes and weaker pricing in the auction channel.
The report now projects earnings recovery during the next phase. Jefferies expects earnings per share to grow at 9% compound annual growth rate between FY2026 estimated and FY2028 estimated.
Net profit is projected at Rs 29,568 crore in FY6, rising to Rs 32,351 crore in FY27, and estimated at Rs 35,111 crore in FY28.
Jefferies wrote in the report, “After 21% EPS decline over FY24-FY26, we expect Coal India’s earnings trajectory to improve with a 9% CAGR over FY26-FY28\.”
The brokerage therefore maintained its Buy rating while raising the price target to Rs 485.
Jefferies on Coal India: Valuation remains close to historical levels with strong dividend yield
Jefferies believes Coal India‘s current valuation remains reasonable.
The stock trades at 9.3 times FYY2027 estimated adjusted price to earnings, which is close to its long-term term average of 9.2x times. Dividend income remains another important support,’support, it explained.
Jefferies estimates dividends of Rs 26 per share in FY2026, Rs 28 per share in FY2027, and Rs 28 per share in FY2028. That translates to roughly 6% dividend yield at the present market price.
The brokerage also pointed out that Coal India trades at a large valuation gap compared with NTPC.
Jefferies said, “COAL is trading at 36% discount on one year forward PE versus a historical average discount of 15%.”
Electricity demand recovery may lift dispatch volumes
Weak electricity consumption has been one of the biggest drags on Coal India in the current financial year.
Jefferies said dispatch volumes grew at a strong 10% compound annual growth rate between FY21-FY24.
Momentum slowed after that period. Dispatch growth came in at 1% year on year in FY25, while volumes have declined 3% year on year during the first eleven months of FY26 due to weak electricity demand.
Jefferies expects improvement going ahead. Weather models referenced by the brokerage indicate nearly 60% probability of an El Niño event during the June to September 2026 monsoon. Historically, such years bring lower rainfall, which often increases electricity consumption from agriculture and households.
Jefferies said in the report, “Recovery in power demand, amid expectations of intense summer and weak rains, should boost COAL’s volumes.”
The brokerage therefore expects dispatch volumes to grow about 5% annually between FY2026 estimated and FY2028 estimated, reaching 735 million tonnes, 772 million tonnes and 810 million tonnes during those three years.
Jefferies on Coal India: Global coal price rise could improve auction premiums
Coal India sells a majority of its coal through linkage contracts. Around ten percent of its volumes are sold through electronic auctions where prices depend on market demand.
Auction premiums declined sharply after global thermal coal prices cooled.
Jefferies noted that the premium fell from 228% in FY2023 to 58% in the first quarter of FY2025. Since then the premium has remained relatively stable. The third quarter of FY2026 recorded a premium of about 62%.
International coal prices recently moved higher after remaining stable for more than a year.
Jefferies wrote, “Higher global prices should lift domestic e-auction premiums too.”
The brokerage expects auction premiums between 63% and 69% from the fourth quarter of FY2026 through FY2028. This assumption remains below the long term average of 76% between FY2010 and FY2025.
Jefferies on Coal India: Captive coal production is rising but Coal India still holds strong demand share
India has seen rapid expansion in captive coal mining by companies that produce coal for their own consumption.
Jefferies estimates captive production grew at 25% compound annual growth between FY2020 and FY2025.
This expansion reduced Coal India’s share of national coal production to 75% in FY2025 from 82% in FY2020.
However demand for Coal India’s supply has remained stable. The brokerage said the company’s dispatch volumes have largely kept pace with overall coal consumption growth in India. As a result Coal India continues to supply around 60% of the country’s coal demand.
Jefferies wrote, “COAL’s dispatch volumes have broadly kept pace with growth in India’s coal consumption over FY20-25.”
The increase in captive mining has mainly replaced imports rather than reducing Coal India’s domestic supply. Imports still accounted for 19% of coal demand in FY2025, the report added.
Jefferies on Coal India: Financial projections for the next 3 years
Jefferies expects steady improvement in revenue and profit over the coming financial years.
Revenue is projected at Rs 1,36,887 crore in FY2026, estimated, rising to Rs 1,46,685 crore in FY2027, estimated and Rs 1,61,367 crore in FY2028 estimated, the report added.
Earnings before interest tax depreciation and amortisation are estimated at Rs 41,415 crore in FY2026 estimated, increasing to Rs 45,429 crore in FY2027 estimated and Rs 49,167 crore in FY2028 estimated. Earnings per share are expected at Rs 47.98 in FY2026, Rs 52.50 in FY2027, and Rs 56.97 in FY2028. Net cash per share may increase to Rs 62 by FY2028 from Rs 46 in FY2026, even after dividend payouts, as per the report.
Conclusion
Coal India’s earnings decline during the last two years was driven by weaker dispatch volumes and lower auction premiums. Jefferies believes conditions may improve as electricity demand strengthens and global coal prices move higher. With dispatch volumes expected to grow, auction premiums likely to improve and dividend yield remaining strong, the brokerage continues to see value in the stock.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.
