Coal India shares decline as Axis Capital downgrades after a subdued business update

Shares of Coal India Ltd. declined on Friday, October 3, as brokerage firm Axis Capital downgraded the stock.

The brokerage downgraded the stock to an "add" rating from its previous "buy" rating. It has price target of ₹420 on the stock, which implies a potential upside of 8% from Wednesday's closing levels.

Axis Capital said it downgraded the stock on continued weakness in volumes.

Coal India reported its provisional numbers for production and off-take for September and the September quarter on Thursday. It reported a decline in both, production and off-take, in September.

Coal India's dispatches declined 1.1% in September to 53.6 million tonne and 2.1% in the first half of the financial year 2026 to 356.2 MT from the previous year. This was due to weak power demand and continuing growth in captive coal production, which has seen a Compounded Annual Growth Rate (CAGR) of 26% over financial year 2020-2025.

India's largest miner has only managed to achieve 37% of its full year production target of 875 MT in the first half of the year. Production for Coal India is generally lower in the first half due to the monsoon months, but picks up pace during the second half.

Due to the weakness in these volumes, Axis Capital has trimmed its financial year 2026-2028 estimates for Coal India's volumes by 2% to 3%, which has resulted in a 3% to 4% cut to its financial year 2026-2028 Profit After Tax (PAT) estimates.

Axis Capital now expects Coal India's dispatches to grow at a 2.1% CAGR over financial year 2025-2028, in comparison to the 5.5% CAGR witnessed during the last five years.

The brokerage said that while Coal India's earnings outlook is weak due to weak volume and lower e-auction realisation, the valuations are supportive at 5.1 times its financial year enterprise value/EBITDA estimates, along with a 7% dividend yield.

Of the 25 analysts that have coverage on the stock, 16 have a "buy" rating, five have a "hold" rating and four have a "sell" rating.

Shares of Coal India were trading 1.6% lower at ₹382.3 apiece. The stock has declined 3.7% in the last six months.

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