Axis Securities upgrades Coal India to Buy on macro support, sets Rs 500 target

Axis Securities changed its stance on Coal India Ltd (CIL) shares to a buy. The brokerage earlier kept the stock at hold. It cited macro support after coal prices rose amid Middle East tensions. Axis Securities set a target price of Rs 500 for the stock.

The brokerage listed four main triggers for Coal India. These include a possible lift in power demand by summer 2026. It also flagged tighter Indonesian coal exports and higher natural gas prices. Axis Securities further pointed to potential value from planned subsidiary listings.

Power demand in fiscal YTD stayed nearly flat, up 0.8% YoY. Demand in Feb'26 rose 1.1% YoY, but fell 6.9% MoM. It was near 133 BU. Axis Securities linked the softer trend to extended monsoon and cooler weather from La Niña.

WMO said La Niña is fading into ENSO-neutral conditions. Forecast models showed rising odds of an El Niño later in 2026. The probability was about 40% by May-Jul'26. Historically, El Niño brings hotter Indian summers, which can raise cooling use and coal-fired generation.

India is the largest consumer of Indonesian thermal coal. Indonesia’s coal export volume in CY25 fell 3.7% YoY to about 391 MT. This missed the government’s 650 MT export target. Axis Securities said tighter seaborne supply can raise landed costs, improving CIL’s domestic competitiveness into FY27.

Axis Securities also flagged higher natural gas prices after disruption risks in the Strait of Hormuz. The route carries about 20% of global oil and 30% of LNG. It said gas-based generation in India could be affected. That situation can lift domestic coal demand, supporting CIL volumes.

Coal India shares: pricing, e-auction premiums and revised estimates

"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.

Metric	Figure	Period
Power demand growth	+0.8% YoY	Fiscal YTD
Power demand	~133 BU; +1.1% YoY; -6.9% MoM	Feb'26
Indonesia coal exports	~391 MT; -3.7% YoY	CY25
CIL offtake (tentative)	62.0 MT; -1.5% YoY	February 26
CIL offtake	674.6 MT; -2.8% YoY	April to February 26

Coal India shares: valuation, risks and subsidiary listing timeline

"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.

Axis Securities highlighted two key risks to earnings growth. It pointed to lower-than-anticipated coal offtake and a larger impact from the wage hike on July 26. It also cautioned that weaker auction prices may follow if power demand does not widen. Rising captive coal production was another concern.

The brokerage also expects CIL to list CMPDI by Mar'26. It expects MCL and SECL listings by the end of 2026. Separately, Goodreturns.in and Greynium Information Technologies Private Limited said the views are those of analysts. The platform said it does not offer investment advice, and readers should verify details with licensed advisors.