Shares of Coal India (CIL) fell by 4% to ₹500.70 on Wednesday after the company reported a drop in sales volume for August. The company sold 52.1 million tonnes of coal in August 2024, which is a 12% decrease compared to the same period last year.
Despite the decline, some analysts remain positive about the stock’s future. Domestic brokerages like Nuvama and JM Financial believe that this drop doesn’t change Coal India’s long-term potential.
Coal India’s sales drop in August was mainly due to lower power demand caused by heavy rains. However, sales for July-August 2024 were down by 5.7% compared to the previous year, indicating that the drop in demand was not just due to the monsoon but also because of overall weak demand. Despite this, Coal India’s total sales from April to August 2024 increased by 1% year-over-year, reaching 308 million tonnes.
What do analysts think?
JM Financial, a brokerage firm, still recommends buying Coal India stock and has set a target price of ₹601. They believe Coal India’s long-term growth remains strong, driven by factors like high power demand and a focus on increasing thermal capacity.
On the other hand, Nuvama has a ‘hold’ rating on the stock and has slightly lowered its target price to ₹542 from ₹567. They adjusted Coal India’s expected sales volumes for FY25 and FY26 due to the recent decline. Nuvama also pointed out that global thermal coal prices, which increased by 6% in the last month, might drop as the monsoon season ends, leading to an oversupply and putting pressure on auction prices.
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