PSU stock to buy now for an upside potential of more than 35%; Do you own it?

Shares of this Maharatna company and the single largest coal producer in the world surged by nearly 0.2 percent to Rs. 411.55 on BSE, during the morning trading session of Monday. 

With a market capitalisation of Rs. 2.51 lakh crores, at 10:37 a.m., the shares of Coal India Limited (CIL) were trading in the red at Rs. 408.25, down by 0.6 percent, as compared to its previous closing price of Rs. 410.65. 

Brokerage Target: 

The global brokerage firm Jefferies has listed Coal India Limited, a state-owned coal mining corporation, among its top picks for 2025 and assigned a target price of Rs. 570 per share. This represents a potential upside of nearly 40 percent from its current trading price of Rs. 408.25. 

Brokerage Outlook on Nifty50: 

Jefferies expects moderate returns for the Nifty 50 index, forecasting a growth of nearly 10 percent, amid challenges such as slowing earnings growth, reduced consumer spending, and profit booking at higher levels. 

The brokerage has adopted a cautious outlook on the Indian stock market, projecting the Nifty 50 benchmark to reach 26,000 by the end of 2025, representing a modest rise of nearly 10 percent. Jefferies prefers large-cap stocks over mid-cap and small-cap options, reflecting its cautious stance. 

According to Jefferies, Nifty’s valuation is currently at 20.5 times its one-year forward price-to-earnings (PE) ratio, which is about 6 percent higher than its 5-year average. The brokerage anticipates the domestic market to align with earnings growth and deliver a 10 percent gain by 2025. 

Across sectors, Jefferies has issued an ‘overweight’ rating for financials, IT, telecom, automobiles, healthcare, utilities & power, and real estate, while issuing an ‘underweight’ rating to energy, consumer staples, consumer discretionary, and materials, and assigning a ‘neutral’ outlook to the industrial sector. 

Jefferies Top Picks: 

Jefferies has identified ICICI Bank, Axis Bank, SBI, Bharti Airtel, JSW Energy, TVS Motor, Coal India, Godrej Properties, and Sun Pharma as its top large-cap picks for 2025. The brokerage anticipates an upside potential ranging from 17-39 percent for these stocks.

Financials: 

Coal India reported a marginal decline in revenue from operations, experiencing a year-on-year fall of nearly 6.4 percent, from Rs. 32,776 crores in Q2 FY24 to Rs. 30,673 crores in Q2 FY25. 

Similarly, its net profit decreased during the same period from Rs. 8,049 crores to Rs. 6,275 crores, representing a decline of nearly 22 percent YoY. 

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Future Outlook 

CIL has set a target to increase coal production to 1 billion tonnes by FY27, up from 773.647 million tonnes in FY24, reflecting a 10 percent YoY growth. The company plans to allocate Rs. 15,500 crores in capex for FY25, with a focus on expanding into solar power and coal gasification. 

Recent Developments: 

On 15th October, Coal India Limited (CIL) made history by introducing online signing of Fuel Supply Agreements (FSA) for both power and non-regulated sector (NRS) customers participating in linkage-based auctions. 

This initiative eliminates the need for physical submission of documents, enabling bank guarantees and other required paperwork to be submitted digitally. 

On 21st November, the company announced it would allow coal supplies beyond the Annual Contracted Quantity (ACQ) to NRS customers in long-term linkage auctions. This decision enables the supply above the ACQ limit and helps NRS customers procure coal suiting their requirements. 

On 2nd December, Coal India executed a Non-Binding MoU in Mumbai to explore the setting up of a Coal-to-Synthetic Natural Gas Project at WCL through Surface Coal Gasification. 

Stock Performance: 

The stock has delivered positive returns of nearly 17.4 percent in one year, while around 16.5 percent of negative returns in the last six months. So far in 2024, the shares of Coal India have given positive returns of about 7 percent. 

About the company: 

Established in 1975, Coal India Limited (CIL) is primarily involved in the business of mining and production of Coal. Its primary customers are the power and steel industries, with additional consumers in sectors such as cement, fertilizers, and brick kilns. 

The company has 10 wholly-owned subsidiaries in India, of which 7 subsidiaries are coal producing, 1 subsidiary is engaged in mine planning, designing, and consultancy services, while the other 2 subsidiaries focus on manufacturing for solar value chain and renewable energy business. 

Additionally, CIL has a fully owned mining company in Mozambique, known as Coal India Africana Limitada. The company accounts for approximately 83% of India’s total coal production. In a country where nearly 57% of primary commercial energy is coal-dependent, the company alone fulfils around 40% of these energy needs. 

Written by Shivani Singh

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