Jefferies raises Coal India target price, says valuation reasonable

Jefferies has raised its target price for Coal India to Rs 485, reflecting a potential total return of 17% including dividends. The brokerage has adjusted its earnings estimates for FY26-FY28 upwards by 1-4%, attributing this to anticipated higher e-auction premiums and a modest recovery in dispatch volumes, which are projected to grow at a CAGR of 5%. The firm expects Coal India's earnings to rebound following a decline of 21% in EPS over the previous years, forecasting a 9% CAGR in earnings between FY26 and FY28, driven by increasing power demand amidst expected intense summer conditions and weak monsoons. Although coal production from captive mines is rising, Jefferies believes that Coal India will maintain its competitive edge, holding about 60% of India's coal demand. The report highlights that the company's stock is trading at a reasonable valuation of 9.3 times FY27 adjusted earnings, offering a dividend yield of approximately 6%. This marks a significant discount compared to NTPC, suggesting investment potential in Coal India as it benefits from rising global coal prices and a structural recovery in electricity demand.