COALINDIA

Rises on E‑Auction Optimism

(CIL) shares hit a new 52‑week high of ₹474, gaining over 5% even as the Nifty 50 fell nearly 1%. The rally reflects expectations of stronger e‑auction realizations amid rising global coal prices, driven by the West Asia conflict and Indonesia’s production cuts. While near‑term tailwinds support pricing, structural demand risks from renewables and captive coal output weigh on long‑term fundamentals. Global Context - Oil and gas price surge spilling into coal markets. - Indonesia cut its 2026 production quota by ~25%, raised domestic sales obligation to 30% (from 25%), reducing export availability. - Rising global prices expected to lift CIL’s e‑auction premiums and offtake. - Historical precedent: e‑auction premiums surged to 3x FSA prices in Q2FY23 post Russia‑Ukraine war, vs. long‑term average of ~60%. Domestic Demand Trends - Power demand expected to rise with summer 2026 and El Niño transition. - Renewable energy additions: 40 GW in FY26 (first 10 months) vs. 8 GW thermal capacity. - Thermal generation down 4.4%, renewables up 23%. - CIL sales volumes fell 2.7% YoY to 675 mt (11M FY26), marking a decline after marginal growth in FY25. - Captive mines’ share of domestic output rose to 21% in FY26, vs. 9% in FY20, reducing reliance on CIL. Financial Performance (9MFY26) - Consolidated EBITDA: ₹31,300 crore, down 18% YoY. - Volumes declined ~3%; average realizations fell 1%. - E‑auction realizations down 6%; washed coal down 12%. - Premiums narrowed: e‑auction at 60% (vs. 70% last year), washed coal at 120% (vs. 160%). Valuation & Outlook - Trades at 5.7x FY27E EV/EBITDA, above 5‑year average of 4x. - Upside hinges on sustained e‑auction premiums and volume recovery. - JPMorgan notes: every 10% rise in e‑auction premiums lifts e‑auction prices by 6.5%. - Despite short‑term pricing tailwinds, structural demand decline and rising inventories at power plants cap long‑term upside.