Brokers' call: ICICI Securities retains 'Add' on Coal India

ICICI Securities has maintained 'Add' rating on Coal India with a target price of Rs 370. Coal India’s production and despatch grew 6.4% and 8.0% respectively YTD FY13.

Though growth rates are expected to soften a bit, it has more to do with the base effect. Some slowdown is however already evident in the numbers MTD December 2012.

As regards e-auction pricing, our channel checks suggest a mixed trend – where preliminary figures indicate an increase in premium in the first two months of Q3FY13, other figures such as mine-wise pricing and feedback from cement players suggest otherwise.

ICICI value the stock based on 7x FY14E adjusted EV/EBITDA multiple.

The key downside risks to our call are: i) slower-than-expected clearance for mines (which can impede production growth), ii) implementation of the MMDR bill, iii) further softening of international coal prices, impacting e-auction realisations and iv) curtailment/diversion of e-auction coal.