Coal India Hits All-Time High: Multibagger Stock Surges 125%—Time to Buy, Sell, or Hold?

Stock Market Today: Coal India’s share price has been performing exceptionally well, reaching near all-time highs following strong first-quarter results and provisional July volume numbers. Over the past year, the stock has more than doubled, providing over 125% returns to investors.

Strong Q1 Performance and Sales Growth

Coal India reported a solid first quarter, with net profit rising by 4% year-on-year to ₹10,943.55 crore, a 26.2% increase compared to the previous quarter. This growth was driven by strong demand and increased production, which helped boost sales volumes.

Volume Growth

In the first quarter of FY25, Coal India’s production reached 189 million tonnes, an 8% increase from the same period last year. Sales volumes also rose by 5%, totaling 197 million tonnes. Despite the monsoon season, which typically slows down production, July saw a 2.5% increase in volume. From April to July, production was up 6.6%, and sales increased by 4.4%.

Analysts at Motilal Oswal Financial Services are optimistic about Coal India’s future, citing strong volume growth, good e-auction premiums, and lower costs.

Power Demand Boost

Coal India provides 90% of its coal to the power sector through Fuel Supply Agreements (FSA). The rising demand for electricity, driven by extreme heat and peak power needs, has increased the demand for coal. Analysts at JM Financial Institutional Securities noted that with significant thermal power capacity under construction or planned, the demand for coal is expected to grow over the next decade.

E-Auction Revenue Potential

With increasing production, Coal India can sell more coal on the open market after fulfilling its FSA commitments. Although international coal prices have softened, the higher production volumes could still support earnings. According to JM Financial analysts, e-auction prices remain stable at around ₹2,300-2,500 per tonne. Motilal Oswal analysts also consider current e-auction prices healthy.

Earnings Upgrades

Motilal Oswal Financial Services analysts have slightly adjusted their EBITDA estimates for FY25 and FY26 but have raised net profit estimates by 11% and 3%, respectively, due to higher-than-expected reversals in overburden removal (OBR) costs. OBR refers to the removal of soil and rocks to enhance mining activities.

JM Financial expects Coal India’s production to reach 839 million tonnes in FY25 and 915 million tonnes in FY26, supported by growing power demand and stable international coal prices. They maintain a BUY rating on the stock, with a target price of ₹601.