Axis Securities, a brokerage, has upgraded Coal India Ltd (CIL) shares to buy from hold on macro tailwinds. Following the recent rise in coal prices due to geopolitical developments in the Middle East, economists have set a target price of Rs 500.
Why Buy The Shares of Coal India?
As per Axis Securities, below are the 4 reasons to buy Coal India shares:
1. Power Demand Subdued So Far, but could Improve Going into the Summer Season: Power demand in fiscal YTD has remained subdued, staying almost flat (+0.8% YoY growth). Power demand in Feb’26 showed moderate growth of 1.1% YoY (down 6.9% MoM) at ~133 BU. The moderation in electricity demand so far is driven by the extended monsoon and cooler-thannormal temperatures (La Niña impact). However, the demand trajectory could see some recovery ahead.
According to the World Meteorological Organization (WMO), the ongoing La Niña event is fading into ENSO (El Niño-Southern Oscillation) neutral conditions, with model forecasts indicating a rising probability of an El Niño episode developing later this year (~40% by May-Jul’26).
Historically, El Niño conditions are associated with above-normal temperatures in India, amplifying cooling demand and driving power consumption higher, a direct positive for coal-based thermal generation and CIL’s offtake. With summer 2026 approaching, and ENSO transitioning, we expect pick up in power demand, providing a tailwind to CIL’s offtake volumes from Q1FY27 onwards.
2. Tighter Indonesian Coal Supply Boosts CIL Outlook: India is the largest consumer of Indonesian thermal coal. However, Indonesia’s coal export volume in CY25 fell by 3.7% YoY to ~391 MT, well below the government’s CY25 coal export target of 650 MT.
For India, which has been a significant importer of Indonesian thermal coal, tighter seaborne supply and higher landed costs of imported coal directly improve the competitiveness of CIL’s domestic coal, potentially diverting incremental demand toward CIL. This is positive for CIL’s volume and pricing outlook heading into FY27.
3. Natural gas prices increased due to disruption in the Strait of Hormuz (through which ~20% of global oil and 30% of LNG moves), which could disrupt gas-based power generation in India and will drive higher domestic coal demand.
4. CIL is expected to list its subsidiaries – CMPDI by Mar’26 and MCL and SECL by the end of 2026, which could unlock some value.
Coal Sector Outlook Turns Brighter As Global Supply Risks Mount
“Geopolitical events in the Middle East have resulted in an uptick in coal prices recently. While e-auction premiums have stabilised around 55-65%, they had spiked to 329% in Q2FY23 due to the impact of the Russia-Ukraine war. Higher international coal prices could pose upside to the e-auction premiums going forward. The possibility of a pick-up in power demand, lower exports from Indonesia, and higher natural gas prices could aid domestic volume growth,” commented the research analysts of Axis Securities.
“We raise our ASP by 2% each (we model higher e-auction prices for FY27/28E at Rs 2,750/t vs. our earlier assumption of Rs 2,500/t) for FY27/28 and marginally raise our FY27/28 sales volume by 0.5%/1% at 793/830MT, leading to EBITDA increase of 8%/9% for FY27/28,” research analysts further added.
Lower-than-anticipated coal offtake and the higher-than-expected impact of the wage hike scheduled on July 26 will be the main threats to earnings growth of Coal India as per the brokerage.
Lower-than-anticipated coal offtake and the higher-than-expected impact of the wage hike scheduled on July 26 will be the main threats to earnings growth. The tentative offtake for CIL on February 26 was 62.0 MT, a slight drop of 1.5% YoY. Offtake totaled 674.6 MT from April to February 26, a 2.8% YoY drop. Lower auction prices might result from a failure to broaden its demand for power in the face of rising captive coal production, according to Axis Securities.
Coal India Target Price
“We value the stock at 6.0x (from 5.5x) 1-year forward EV/EBITDA multiple (unchanged) on Mar’28E (from Dec’27E) Adj. EBITDA. Based on this, we arrive at a TP of Rs 500/share (Earlier TP: Rs 415/share), implying an upside of 12% from the CMP. Consequently, we upgrade the stock from HOLD to BUY rating,” commented the research analysts of Axis Securities.
Disclaimer: The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of Goodreturns.in or Greynium Information Technologies Private Limited (together referred to as “we”). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.