The Coal India stock may not generate much steam this year. As power consumption fell sharply in the first quarter, with offices and factories closed, Coal India’s dispatches were hit, sliding 22% year-on-year (y-o-y). With economic activity likely to remain sluggish, demand for coal may stay low for a while, which will weigh on its stock price. Coal India shares are down 36% from January highs.
Coal India’s Q1 revenue growth contracted 26% y-o-y, higher than what analysts had pencilled in. In addition, fuel supply agreement prices fell about 6% sequentially as demand from power plants slipped. The company has also cut its production expectations to about 650 million tonnes for the year from 700 million tonnes earlier. It produced about 195 million tonnes till August. Hence, it will have to ramp up production significantly to meet its target, which seems difficult.
One positive is that economic activity is recovering, and power demand is almost back to 98% of pre-covid levels, which is encouraging for Coal India.
