Motilal Oswal's research report on Coal India
Robust domestic demand, enhanced vision of 1bt production, and improved e-auction premium are all set to drive a strong near-term performance. COAL growth roadmap is in synergy with the government’s commitment to bring about a transformative change in the power sector by providing 24x7 power supply to all homes sets the stage for COAL to achieve strong coal production over the next few years. COAL’s long-term demand commitment from numerous power plant companies for FSA provides the company with a better business visibility. Though the e-auction premiums have cooled off from their highs, it was compensated by higher volumes in e-auction. We expect COAL to register a better QoQ performance in 4Q with higher volumes on e-auction and almost similar levels of premium. COAL trades at EV/EBITDA of 3.6x FY24E. We reiterate our Buy rating on the stock with a target price of INR275 (5x EV/EBITDA). We believe COAL is well placed to capitalize on the growth opportunity ahead.
Outlook
We maintain our e-auction premium estimate for FY23 at 231% and we reiterate our BUY rating on the stock with a target price of INR275 (5x EV/EBITDA). COAL continues to be our top pick in the mining sector. Any hike in FSA will further add to the financial performance of the company.
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