Shares of Coal India Ltd., the country’s largest miner, dropped by as much as 3.5% on Monday, March 3, following the release of its February business figures.
Production Analysis
In February, the company witnessed a 0.8% year-on-year decline in production, generating 74.1 million tonnes (MT). For the full year, production has shown a modest 1.5% increase year-on-year, reaching 695.3 MT, which is approximately 83% of Coal India’s annual production target of 838 MT for FY2025. To meet its target for the current financial year, the company now faces the challenge of producing an ambitious 142 MT in March, the final month of the fiscal year, a figure that far exceeds its average monthly production of approximately 69 MT. This represents more than double the typical output, highlighting the scale of the challenge when compared to historical performance.
Offtake Decline
Offtake volumes in February were also disappointing, declining by 4.8% year-on-year to 62.1 MT. Year-to-date offtake totals 693.4 MT, marking a marginal growth of 1.3% compared to the same period last year. Morgan Stanley, a leading brokerage firm, has labeled the decline in offtake as “a key negative.” The firm cited slow growth in power demand and inventory build-up as primary factors adversely affecting offtake. The implications of these factors are significant; sluggish power demand indicates weaker industrial and economic activity, reducing the need for energy resources. Additionally, inventory build-up suggests that supply is outpacing demand, which can lead to further reductions in production and pricing pressures in the market.
Impact on Earnings
Morgan Stanley warned that this significant slowdown in offtake could impact Coal India’s earnings for both the fourth quarter of the current financial year and for FY2026 unless there’s a robust recovery in economic activity. Nevertheless, the brokerage remains optimistic about Coal India’s prospects. It maintains its “overweight” rating—indicating confidence that the stock will outperform its industry peers—based on expectations of strong long-term fundamentals and operational resilience. The firm has set a price target of ₹525, suggesting a potential upside of 46%.
Analyst Ratings and Market Reaction
Among the 24 analysts covering Coal India, 18 recommend a “buy,” four suggest a “hold,” while two advise “sell.” On Monday, the company’s shares traded 3.3% lower at ₹357.35, marking a steep 35% drop from its recent high of ₹543 in mid-September, attributed to rising costs and weakening demand in global coal markets.
