Coal India Stock: Jefferies Raises Target to ₹485 for 2026

Introduction

Brokerage firm Jefferies has reiterated its 'Buy' rating on Coal India Ltd (CIL), raising its price target to ₹485 per share from ₹450. The revised target, announced on March 11, 2026, suggests a potential upside of around 9% from the stock's previous closing price of ₹443.45. The positive revision is based on expectations of a recovery in power demand, higher e-auction premiums, and an attractive valuation profile, positioning the state-owned miner for a potential earnings rebound.

The Rationale Behind the Upgrade

Jefferies' optimistic stance is built on several key factors. The primary driver is the anticipated revival in electricity consumption. After a period of subdued demand, which saw CIL's dispatch volumes grow just 1% year-on-year in FY25 and decline 3% in the first eleven months of FY26, a reversal is expected. Forecasts for an intense summer and a higher probability of weak monsoons are projected to significantly increase power demand, directly benefiting Coal India's sales volumes.

Another crucial element is the pricing environment. Global thermal coal prices have seen a notable increase, rising approximately 16% in the past week. This trend is expected to lift domestic e-auction premiums, which are a key source of profitability for Coal India. Jefferies has factored in an e-auction premium of 63-69% over linkage coal prices for the period from Q4 FY26 to FY28. While this is below the long-term average of 76%, it still represents a significant boost to realisations. E-auctions currently account for about 10% of the company's total dispatches.

A Turning Point in Earnings

After an estimated 21% decline in earnings per share (EPS) between FY24 and FY26, Jefferies projects a significant improvement in Coal India's earnings trajectory. The brokerage forecasts a 9% compound annual growth rate (CAGR) in earnings over FY26-FY28. This growth is supported by an expected expansion in EBITDA, projected to rise from ₹41,400 crore in FY26 to ₹49,200 crore in FY28. Consequently, EPS is forecast to increase from ₹48 in FY26 to ₹57 by FY28. In line with this outlook, Jefferies has lifted its FY26–28 earnings estimates by 1–4%.

Valuation and Scenarios

Valuation remains a core pillar of the investment thesis. Coal India's stock currently trades at 9.3 times its estimated FY27 adjusted earnings, which is consistent with its long-term average multiple of 9.2 times. Furthermore, the stock offers an attractive dividend yield of approximately 6%, reinforcing its appeal for income-focused investors. Jefferies' new target price of ₹485 is based on a multiple of 9.5 times its FY28 adjusted EPS.

The brokerage has also outlined different scenarios for the stock's performance.

Competitive Position and Market Share

Despite the rise of captive coal production in India, Jefferies believes Coal India's dominant market position remains secure. The company holds a substantial 60% share of the country's overall coal demand and accounts for about 75% of total domestic production as of FY25. The report highlights that the growth in captive mining has primarily displaced coal imports rather than CIL's volumes. With imports still constituting 19% of demand, there is a significant substitution buffer that benefits Coal India as the government continues its push to reduce thermal coal imports.

Broader Analyst Sentiment

While Jefferies is bullish, the broader analyst community holds a more varied view. Out of 25 analysts covering Coal India, 12 have a 'Buy' rating, 8 recommend 'Hold', and 5 advise 'Sell'. This indicates a moderately positive but not unanimous consensus. Other brokerages have also weighed in with their perspectives.

Financial Strength and Shareholder Returns

Coal India's robust balance sheet and strong cash-generating capabilities are significant strengths. The company maintains a net cash position, and its cash per share has been rising despite a consistent history of generous dividend payouts. Jefferies estimates that the miner can sustain annual dividends of ₹26–28 per share over FY26–28. This translates to a healthy payout ratio of 50–55%, solidifying its reputation as a high-yield public sector undertaking.

Conclusion

Jefferies' upgraded target for Coal India is underpinned by a confluence of positive factors, including a cyclical recovery in power demand, favourable global pricing, and a compelling valuation. While challenges such as volume growth moderation persist, the company's strong market position and financial health provide a solid foundation. Investors will be closely watching power consumption trends during the upcoming summer months, as this will be a critical test of the brokerage's optimistic thesis.