Coal India Q2 hit by weak volumes, high costs; brokerages split on outlook | Markets News

The state-run miner posted in-line earnings before interest, tax, depreciation and amortisation (Ebitda) of ₹5,850 crore, down 24 per cent year-on-year (Y-o-Y), Nuvama said, attributing the fall to “higher CoP and lower credit of stripping activity adjustment.” The brokerage noted that Ebitda per tonne stood at ₹352, down ₹105 per tonne Y-o-Y.

“Volume growth has been missing with H1FY26 volume down ~3 per cent Y-o-Y due to lower power demand and rising competition from captive miners,” the brokerage pointed out. Nuvama trimmed its FY26E and FY27E Ebitda estimates by 3 per cent and 2 per cent, respectively, to factor in “lower volume and prices.”

Despite subdued earnings growth – with an estimated Ebitda compound annual growth rate (CAGR) of -1.2 per cent over FY25-28 – Nuvama analysts highlighted the stock’s attractive dividend yield of around 6.5 per cent, based on a dividend per share (DPS) estimate of ₹25. “We roll over to FY28E, yielding TP of ₹375 (earlier ₹367), valuing at 5x FY28E EV/Ebitda; maintain ‘Reduce’,” it said.

Revenue for the quarter stood at ₹30,200 crore, down 2 per cent Y-o-Y and 16 per cent sequentially, against Motilal’s estimate of ₹29,900 crore. Adjusted Ebitda (excluding OBR expenses) came in at ₹5,850 crore, a steep 18 per cent Y-o-Y and 48 per cent quarter-on-quarter (Q-o-Q) decline, versus its estimate of ₹8,500 crore. “Ebitda was impacted primarily by higher other costs (+22 per cent Y-o-Y),” the brokerage added.

Ebitda per tonne dropped to ₹357, down 16 per cent Y-o-Y and 39 per cent Q-o-Q. Adjusted profit after tax (APAT) came in at ₹4,350 crore, down 31 per cent Y-o-Y and 50 per cent QoQ. “We expect e-auction volume and premium to recover in H2FY26, supported by demand recovery from the non-FSA sector,” Motilal Oswal said. The brokerage, thus, projects a 3 per cent volume compound annual growth rate (CAGR) over FY25-28, translating into 5 per cent revenue and 7 per cent Ebitda CAGR.

At the current market price, Coal India trades at 4.2x FY27E EV/Ebitda and 1.8x price-to-book value. “We reiterate our ‘Buy’ rating with a TP of ₹440 (premised on 4.5x EV/Ebitda on Sep’27 estimate),” it said.

“Production and offtake declined sequentially on seasonal weakness, while FSA and e-auction prices also softened,” Emkay said. It cautioned that “subdued power demand and rising competition from private miners” may continue to pressure volumes and e-auction premiums in the near term.

However, Emkay maintained its ‘Add’ rating, highlighting medium-term support from capacity expansion plans. “Medium-term prospects are supported by plans to raise capacity to 900mt over the next 3-4 years,” it said. The brokerage revised its target price down by about 6 per cent to ₹400 from ₹425 earlier.

That said, brokerages remain divided, with Motilal Oswal analysts betting on a recovery-led upside, while those at Nuvama and Emkay remain cautious amid volume pressure and cost headwinds.