Coal India e-auction mix and washery capacity support margin outlook

Investment View and Quarterly Performance

Motilal Oswal Financial Services Ltd retains a Buy rating on Coal India with a target price of Rs510 per share. The broker describes Coal India's 1QFY27 revenue performance as broadly in line with expectations, while EBITDA missed estimates because of elevated operating costs linked to the geopolitical situation. Motilal Oswal expects some of these cost headwinds to stabilise over the coming quarters.

Coal India reported 1QFY27 revenue of Rs46,250 crore, up 8 per cent year on year and broadly flat quarter on quarter, supported by higher volume offtake. Adjusted EBITDA, excluding overburden removal expenses, was Rs10,240 crore, down 9 per cent year on year and 17 per cent quarter on quarter, compared with Motilal Oswal's estimate of Rs11,800 crore. Adjusted PAT was Rs8,850 crore, flat year on year and down 18 per cent quarter on quarter, versus the broker's estimate of Rs9,300 crore.

Cost Pressures and Volume Trends

The EBITDA shortfall reflected a 27 per cent year-on-year increase in input costs, including explosives, oil and lubricants, and spare parts. Contractual expenses increased 11 per cent year on year because of higher outsourcing, while other expenses rose 14 per cent, driven by higher Jharkhand mineral-bearing land cess and elevated power costs.

Coal production was 170 million tonnes in 1QFY27, down 7 per cent year on year and 29 per cent quarter on quarter. Sales volume was 198 million tonnes, up 4 per cent year on year and flat quarter on quarter.

E-auction, Washery and Renewable Energy Initiatives

Coal India commenced production at the ASGKCC Mine in the Katras Area under an MDO revenue-sharing model, under which BCCL receives 9 per cent of revenue. The mine produced 12 thousand tonnes during the quarter.

E-auction volume was 26.5 million tonnes, representing 13 per cent of total sales volume, compared with 21 million tonnes and an 11 per cent contribution in 1QFY26. However, the e-auction premium declined to 35 per cent from 41 per cent a year earlier.

BCCL commenced commercial operations at the Bhojudih Coal Washery in May 2026. The 2 MTPA addition increased BCCL's total coal-washing capacity to 17.35 MTPA, including 1.7 MTPA operated through TSL. Coal India also commissioned about 200 MW of its 300 MW Khavda solar project in Gujarat in May 2026 and recorded Rs5.68 crore of energy-sale revenue during the quarter. The Board recommended an interim dividend of Rs5.5 per share.

Earnings Outlook and Valuation

Motilal Oswal forecasts a 3-4 per cent volume CAGR for Coal India over FY26-28. The broker expects a rising share of e-auction volumes and better premiums to support net sales realisation and margins, resulting in FY26-28 revenue and EBITDA CAGRs of 4 per cent and 9 per cent, respectively.

The broker also views higher coal-washery capacity as supportive of Coal India's domestic coking and non-coking coal market share. Management continues to focus on expanding coal-mining operations, funded through internal accruals.

Motilal Oswal retained its estimates and values Coal India at 6 times FY28E EV/EBITDA to derive the Rs510 target price. At the report CMP of Rs428, the stock traded at 4.9 times FY28E EV/EBITDA.