Impressive performance sustains: Coal India (CIL) sustained its robust operating performance in Dec-21. Key points: i) Production rate improves to 1.94mt/day—similar to offtake. ii) Larger subsidiaries, particularly MCL, continue to improve. iii) Pit-head inventory declines further to 28.6mt—one of the lowest levels ever. Going ahead, we expect production to gather steam, particularly at larger subsidiaries, thereby alleviating coal shortage. We expect cash generation in Q3FY22 to improve on the back of i) higher offtake (up 18% QoQ); ii) better e-auction premium; and iii) working capital unlocking. Maintain ‘BUY’ on CIL with an unchanged TP of 210 on 9x FY23E EPS.
Outlook and valuation: Improvement in store; maintain ‘BUY’: Taking cues from production/offtake rates, we believe H2FY22 is likely to be much better for CIL. Furthermore, the higher e-auction premium achieved in Oct-Nov-21 and focus on the non-regulated sector in Dec-21 is likely to improve profitability.
