Shares of Coal India surged over 2% during Tuesday’s intraday trading session following the initiation of coverage by brokerage firm Emkay Global Financial Services.
Key Highlights
- Coal India shares rose to an intraday high of Rs 440.85 on the BSE.
- Emkay Global initiated coverage with a ‘Buy’ rating and a target price of Rs 550 per share.
- The brokerage expects a significant upside potential of more than 27% from the previous closing price.
Emkay Global’s analysis underscores India’s continued reliance on coal due to its large population and economic scale, suggesting that coal usage may even accelerate until renewable energy sources scale up adequately.
Amit Lahoti, Senior Research Analyst at Emkay Global Financial Services, expressed confidence in Coal India’s future, citing sustained coal demand, strong margins, and free cash generation as key drivers of value creation.
Investment Outlook
Emkay Global anticipates a multi-year value-creation journey for Coal India, with expected volume growth and high returns on invested capital.
According to the brokerage, coal production is projected to reach 1 billion tonnes in the medium term, indicating a 9.2% compound annual growth rate over the next few years.
Despite the positive outlook, Emkay Global acknowledges potential risks, including the rapid adoption of renewable energy, evolving ESG (Environmental, Social, and Governance) concerns, and government disinvestment.
Financial Metrics
| Valuation | Multiple |
|---|---|
| P/E Ratio (FY25) | 7.9x |
| EV/EBITDA (FY25) | 5.2x |
The stock is expected to deliver a free cash flow yield of 8.8% and a dividend yield of 6.7%, according to Emkay Global’s analysis.
Performance and Risks
Coal India shares have shown strong performance, delivering returns of nearly 20% in the past three months and more than 109% over the past year.
However, potential risks such as a faster shift to renewable energy, increasing ESG considerations, and government divestment could impact the stock’s future prospects.