Coal India Ltd. may report lower-than-expected volume growth in fiscal 2025 due to rising coal production from captive mines, held up imports and a heavy monsoon, according to Nuvama Research.
However, the brokerage expects the Coal India's Ebitda to grow at compound annual growth rate of 5% over fiscal 2024-2026 driven by a average volume growth of 5% during the same period.
Nuvama has maintained its 'hold' call on the company with a target price of Rs 567 apiece, implying an upside of 5.4% from Friday's closing price.
Coal India: Volumes
The coal mining company needs to expand its volume growth to 15% year-on-year for the rest of fiscal 2025 to be able to meet the management guidance, which looks difficult as per Nuvama.
The brokerage expects Coal India's fiscal 2025 and 2026 volumes to be at 791 and 831 million tonne compared to the management's guidance of 838 and 905 million tonne, respectively.
Adding to this, coal prices will remain flat till fiscal 2026 as Nuvama does not see any increase in fixed supply agreement for coal prices while e- auction coal prices remain range bound.
However, on a positive side, Coal India's management remain confident of keeping costs under control, the brokerage said. The firm expects employee costs to stay flat for the next two years due to reduction in headcounts.
Impact of Retrospective Mineral Taxation
The latest ruling by the Supreme Court of India allowing states to tax additional cess on mineral royalties, leaves Coal India with a liability of Rs 31,590 crore, according to Nuvama Research.
The brokerage, however, notes that over 80% of Coal India's volumes are being sold under fixed supply agreements, which could help the company recover around Rs 24,000- 25,000 crore from customers.
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