COALINDIA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.5

📊 Core Financials:

- Quarterly PAT surged to 8,342 Cr. from 116 Cr., showing massive profit recovery (+102% YoY).

- EPS of 34.5 ₹ reflects strong profitability.

- ROCE (96.6%) and ROE (96.1%) are exceptionally high, indicating superior efficiency and shareholder returns.

- Debt-to-equity ratio of 0.03 highlights negligible leverage.

- Cash flows remain robust, supported by strong operating margins and consistent demand for coal.

💹 Valuation Indicators:

- Current P/E of 11.2 is slightly below industry average (12.4), suggesting undervaluation.

- P/B ratio ~ 11.9 (385 ₹ / 32.4 ₹), indicating stretched valuation relative to book value.

- PEG ratio of 0.75 signals earnings growth is keeping pace with valuation.

- Intrinsic value appears higher than current price, offering margin of safety.

🏭 Business Model & Competitive Advantage:

Coal India operates as the largest coal producer in India, supplying to power, steel, and cement industries. Its competitive advantage lies in scale, government backing, and monopoly-like position in domestic coal mining. The company benefits from consistent demand for energy but faces long-term sustainability challenges due to global clean energy transitions.

🎯 Entry Zone & Long-Term Guidance:

- Entry zone: 360–375 ₹ (near support levels and undervaluation zone).

- Long-term holding: Attractive for dividend-seeking investors and those valuing strong cash flows. Accumulate on dips for steady income and defensive portfolio positioning.

Positive

• Exceptional ROCE (96.6%) and ROE (96.1%)
• Debt-to-equity ratio of 0.03 shows negligible leverage
• Strong dividend yield at 6.90%
• Massive quarterly PAT recovery (+102%)
• DII holdings increased (+0.14%)

Limitation

• P/B ratio (~11.9) indicates stretched valuation relative to book value
• FII holdings decreased (-0.20%)
• Long-term sustainability risk due to global clean energy transition

Company Negative News

• FII holdings reduced (-0.20%)
• Concerns over coal demand in the long run due to renewable energy adoption

Company Positive News

• Quarterly PAT surged to 8,342 Cr. from 116 Cr.
• DII holdings increased (+0.14%)
• Strong 52-week performance (+52.6%)
• Dividend yield at 6.90% supports investor income

Industry

• Industry P/E at 12.4 indicates sector is moderately valued
• Coal demand driven by power generation, steel, and cement industries
• Sector faces long-term challenges from renewable energy adoption

Conclusion

⚖️ Coal India demonstrates exceptional efficiency, strong profitability, and attractive dividend yield, making it a solid defensive play. While valuations are stretched on book value, the company remains undervalued on P/E and PEG metrics. Best accumulated near 360–375 ₹ for long-term income-focused investors, with caution on sustainability risks.