Emkay Global Financial's report on Coal India
With RM and employee costs reined in, Coal India (CIL) reported a strong quarter, despite revenue being in line with our estimates. Increasing receivables is a cause of concern, but we believe that if dispatches remain steady, cash flows will improve in H2FY21. CIL has paid Rs47.5bn as additional advance Income tax in Q4. It has specifically mentioned that it will not settle cases under various tax settlement schemes floated by the government to mop up tax collections. This advance tax should be set off in FY21 itself. E-auction premiums during Q4 stood at 45% but are likely to moderate substantially in H1FY21. However, we expect the economy to start improving from Q3 and should result in higher e-auction premiums. We note that moving volumes is crucial now.
Outlook
We cut FY21/22E dispatches by 13%/3% and assume E-auction premium at 13%/39%, owing to lower demand. As a result, FY21/22E EBITDA is reduced by 48%/27%. However, valuations at 3.3x FY22 EV/EBITDA estimates are compelling. We maintain Buy and OW in EAP, with a revised TP of Rs208 (from Rs271) at 5x FY22 EV/EBITDA estimates.
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