Stress-dependent permeability in coal seam gas (CSG) reservoirs can challenge the development of coal fields with lower initial permeabilities. Thus, advanced well stimulation techniques become essential. This work evaluates the performance of novel graded proppant injection (GPI) technique for CSG reservoir stimulation using reservoir simulation models. A simplified model for steady-state incompressible fluid flow during the early dewatering stage of production is validated by the analytical model results. A general model is then developed for GPI process during unsteady-state compressible two-phase flow in coal, accounting for gas desorption, matrix shrinkage, heterogeneous permeability distribution, and cross-flow. Fractured porous medium is modelled by a dual-porosity radial model. Stress-dependent permeability and matrix shrinkage effects are modelled using the Palmer-Mansoori equation. Under the incompressible fluid flow condition, the productivity index after well stimulation using GPI technique increases by 1.3~2.3 times. Moreover, simulation of compressible gas-water flow coupled with gas desorption from matrix yields 4~13% increment on recovery factor (RF) during production for 30 years. Stimulation accounting for matrix shrinkage enhances RF by 9~13%. For heterogeneous permeability distribution, more permeable layers exhibit deeper penetration of particles. The enhanced permeability owing to GPI yields higher production of both gas and water. Cross-flow between the coal layers influence the effectiveness of the depressurisation process and hence gas desorption post-stimulation. It allows dewatering of deeper layers and additional desorption of gas.