We attended Coal India’s (CIL’s) management call on business update and got better clarity on the volume ramp-up and cash utilisation aspects of the company. Key takeaways: (i) Dividend payout likely to remain constrained in the near term; (ii) CIL is gearing up to ramp up production when demand revives; and (iii) import substitution remains a strategic imperative. In our view: (i) Recouping lost volumes in Q1FY21 looks challenging; and (ii) dividend may be restricted to Rs 12/share clouded by possible outgo on settlement of tax disputes, inflated receivables & high capex intensity.
That said, we still find balance sheet sufficiently robust with likely cash generation (post tax) of Rs 140 bn in FY21e. Maintain Buy with TP of Rs 165 (exit multiple of 7.0x FY22e EPS).
