Coal India (COALINDIA)

FairStock Score: 80/100 — HIGH CONVICTION

Score breakdown: P/E: 3/3 · ROCE: 2/2 · Growth: 0/2 · Dividend: 1/1

Key Financials

Strengths

• High capital efficiency with ROE of 28.24% and ROCE of 48.04%
• Low debt/equity of 0.13 and strong free cash flow of ₹19,124 Cr
• Attractive dividend yield of 6.15% with promoter holding of 63.13%
• Latest quarter shows solid earning power: ₹34,924 Cr sales and ₹7,166 Cr net profit
• P/E of 8.89 offers an earnings yield above 11% if profits stabilise

Concerns

• Sales fell 2.76% and profit fell 13.10%, showing current earnings momentum is weak
• DCF intrinsic value of ₹108.75 is far below the market price; Graham Number of ₹431.71 offers almost no margin of safety
• EV/EBITDA of 40.74 suggests the headline P/E understates true valuation risk
• Current ratio of 1.04 is tight, and Z-score of 2.43 warrants caution

AI Analysis

Looking at Coal India, I first see a very profitable enterprise: 28.24% return on equity, 48.04% return on capital, and almost no leverage at 0.13 debt-to-equity. Those are the kind of numbers that grab a value investor's attention. The free cash flow of ₹19,124 Cr also gives the company room to keep paying that 6.15% dividend, and with promoters owning 63.13%, interests are broadly aligned with mine. But I must remind myself that a strong balance sheet is not the same as a growing business. Sales are down 2.76%, profit is down 13.10%, and the five-year 9.75% revenue CAGR is history, not guidance for the future. The latest quarter's ₹34,924 Cr sales and ₹7,166 Cr profit show earning power, but this is a cyclical commodity. Its moat, if any, has to be cost and scale, not pricing power; the figures alone do not prove a durable moat. The market quotes a P/E of 8.89, yet EV/EBITDA of 40.74 tells me cheapness is not as simple as it looks. Ben Graham would insist on a margin of safety; at ₹450.60, the Graham Number of ₹431.71 sits below the price, leaving almost no room for error. The DCF value of ₹108.75 is even more sobering. Current ratio 1.04 is adequate, not strong, and the Z-score of 2.43 keeps me cautious. Coal India is a high-return, low-debt cash generator, but its earnings will follow the coal cycle. I would own it for the dividend, not for growth, and only at a lower entry price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer