Coal India - Share Of Coal In Generation Mix Back To 70% Level; Maintain BUY - Anand Rathi Research

India’s power demand reached 270GW in Jul-26 and continued to remain >250GW in the first half of Oct-26. With the contribution from hydro power falling in Oct-26, the shortfall was largely compensated by coal-based thermal power generation. The improvement in coal demand from thermal power plants was also reflected in coal rake loadings, which rose to 287 rakes/day, returning to Jun-Jul’26 levels. Though, the share of rake loadings directed towards the power sector increased to 93.71% (highest since Aug-25), the stepped-up evacuation efforts by COAL and Indian Railways, are yet to translate into a sustained build-up of inventories at power plants. As on date, >95GW of power plants have coal stocks below 25% of normative levels, with at least a dozen plants operating with stocks <10%. 

This indicates the need for significant inventory built-up, going forward. The prevailing power shortage is also prompting state governments to explore multiple procurement routes, which is likely to keep e-auction premium elevated in Q3FY27. We believe the time lag between order placement and actual deliveries has led to estimated shortfall of ~7.8m tonne in e-auction volume, which led to miss to ARe, with the benefits from the same expected to accrue in Q3FY27. In line with H1FY27 show, we have tweaked the product-mix, which has led to reduction in our FY27/28 EBITDA estimates by 4.6/4.7%. In lieu of macro-economic scenarios and 3% y/y reduction in global non-coking coal trade volume, our e-auction premium estimate of 47.5/45/42.5% for FY27/28/29e offers comfort. Rolling forward our estimates to Sep-28, we maintain BUY on Coal India with an unchanged TP of Rs520, valuing the stock at 5.9x EV/EBITDA (in-line with its LTA).

Lower-than-expected performance: FSA volume rose 8.4% y/y to 159.7m tonne (in-line with ARe), while e-auction volume missed miss to ARes at 22.8m tonne (up 47.7% y/y), possibly led by time lag between order booking and recognition. Revenue grew 20.9% y/y to Rs441.8bn, while blended ASP rose 7.3% y/y to Rs2,346/tonne. E-auction premium at 41% (down 600bps q/q). Reported EBITDA/Adj. EBITDA came in at Rs84.9/73.9bn (both lower than ARe).

H1 capex at 109% of planned outlay: The company registered ~27% y/y growth in capex to Rs79.7bn with key focus on strengthening mining infrastructure, acquiring land, procuring HEMM and advancing diversification projects. Mine-to-loading capex stood at Rs65.8bn (~82.6% of total outlay). With company undertaking multiple FMC projects with Rs256bn outlay by FY29, seven railway projects under development and strategic diversification projects i.e., Talcher Fertilisers and coal gasification etc. would eventually help company to inch towards 1bn tonne offtake in the coming years. 

Outlook and Valuation: Our FY27 offtake estimate of 799m tonne is substantially below COAL’s guidance of 850m tonne, which offers enough cushion to our estimates. Coal continues to remain a major energy source in India and with COAL being at centre of it benefits the most. We maintain BUY rating on the stock with a TP of Rs520, valuing it at 5.9x Sep-28 EV/EBITDA.

Key Risks: (a) Lower offtake; (b) higher RE share in power generation; and (c) lower e-auction volume and premium.