Coal India: Why did JP Morgan lower the target price of this PSU stock?

Morgan ₹395 from ₹430, cites multiple challenges in the coal industry. The revised price target indicates an upside potential of 8%. Still, the broker maintained a “neutral” rating, indicating caution about the stock’s near-term outlook.

Key concerns highlighted by JPMorgan include weaker demand for electricity, lower coal prices with oversupply and rising competition among captive players. The broker pointed out that these factors seriously affected the earnings visibility of Indian coal, which made it too early for investors to take the underlying phishing method.

Weak international coal prices affect profit margins

One of the main reasons for JPMorgan’s downgrade is to soften international hot coal prices, which puts pressure on Indian coal’s profit margins. Currently, the global coal market has witnessed oversupply, resulting in lower prices for coal exporters. As a result, the earnings outlook for Indian coal remains weak, with limited upward potential in the short term.

In addition, domestic electricity demand has remained insufficient since August 2024. This has led to higher production volumes in India and above-average inventory levels, further weakening the company’s revenue outlook.

The growing competition among captive players erodes market share

Another major problem with JPMorgan mark is the increasing competition among captive coal producers. The broker noted that coal dispatches of captured participants witnessed a sharp year-by-year growth (YTD) increase, thus reducing the market share of Indian coal.

Traditionally, the company dominated India’s coal supply chain, but as more private sector players increase production, Indian coal is facing pricing pressure and declines in quantity. This competitive landscape is expected to continue in the coming quarters, limiting the upside potential of the stock.

Indian coal production guide

Despite these challenges, Indian coal is still striving to meet its 25-year production target of 838 million tons (MT). With two months left in the fiscal year, the company has achieved about three-quarters of its target. However, JPMORGAN believes that domestic demand and oversupply issues will continue to weigh the performance of Indian coal.

When will Morgan be bullish?

JPMorgan has identified two key conditions that could escalate in India’s coal. First, if the stock is below ₹With 340 shares per share, representing the disadvantage of the current level of another 6% and it may provide investors with an attractive entry point. Second, if India’s electricity demand improves significantly in the coming months, it could help coal recover lost market share and increase visibility of earnings.

Indian coal Q3FY25 results

Indian coal’s December quarter results reflect on the ongoing pressure on the coal market. The combined net profit reported by the state-owned miners fell year-on-year, down to ₹From 85.06 million ₹The same period last year was 102.53 million.

Operational revenue has also declined ₹35,78 million, ₹361.54 million in Q3FY24. However, according to the order, the company reported a 35% increase in profits ₹25 Q255’s $62.89 billion, while revenue from 17% ₹The last quarter was 306.72 million.

Indian coal stock price performance

Indian coal fell by 1% at its last meeting on February 25, 2025 ₹361.25 on BSE. Thanks to Maha Shivratri, the market is closed for trading today.

Currently, the stock is about 34% from its peak ₹544.70, hit in August 2024, while it is more than 3% lower than its 52-week low ₹349.20, recorded earlier this month on February 17.

PSU stock has lost more than 18% over the past year. Additionally, so far, it has dropped by 9% after a 3% increase in January. Prior to that, the stock lasted for four consecutive months between September and December 2024, down 27% during that period.

Although the stock remains a key player in India’s energy sector, the near-term outlook remains uncertain due to global and domestic challenges.

All in all, JPMorgan’s downward revision of Indian coal target price ₹395 highlights the ongoing challenges of the coal industry. The stock faces near-term headwinds due to weak electricity demand, lower coal prices and rising competition among captive participants. Although coal production is still normal, earnings pressure and limited pricing power are still weighing on investor sentiment.

The broker shows that further correction of stock prices or a strong recovery in power demand may make its position more positive. But for now, it remains cautious about stocks, advising investors to wait for better clarity before accepting bullishness.

Disclaimer: The views and suggestions presented above are those of individual analysts or brokerage firms, not mint. We recommend that investors contact certified experts before making any investment decisions.