Target: ₹475
CMP: ₹438.70
Coal India’s Jun-26 production declined 1 per cent y-o-y to 57mt, reflecting comfortable inventory (14 days vs long-term average of 13). However, inventories have already declined 22 per cent YTD, and we expect production to improve from H2-FY27 as seasonal disruptions recede.
We forecast output to increase from 768mt in FY26 to 815/850mt in FY27/28 (about 6 per cent CAGR), supported by 6-7 per cent power demand growth, stronger thermal generation and electricity consumption, and tighter seaborne coal markets following Indonesia’s production target cut to 600mt for CY26 (790mt in CY25). Offtake stood at 65.8mt (down 1.3 per cent MoM and 7.5 per cent YoY), driven by strong dispatches from CCL and ECL, translating into an estimated 783mt for FY27 (up 5.3 per cent YoY) vs 744mt in FY26.
The seasonal demand pickup and potential El Niño impact reinforce our constructive FY27 demand outlook. However, the continued rise in renewables (26.7 per cent of the power mix vs 25.0 per cent a year ago) remains a structural headwind to incremental thermal coal demand.
With additional support from a reduction in Indonesia’s coal production target to 600mt in CY26 vs 790mt in CY25, rising renewable penetration remains a structural headwind over the long term. We believe near-term demand and supply dynamics remain supportive.
We maintain Add with TP of ₹475.