ICICI Securities research report on Coal India
We hosted Coal India’s (CIL) CMD Mr. Pramod Agrawal to get an update on CIL’s current business and future plans. Key takeaways from the call are: 1) FY21 production targets may be scaled down from 710mnte given the current demand environment; 2) coal inventory both at pithead and power plants remain high and CIL’s current focus is on OB removal to prepare for the demand surge post monsoon; 3) major focus in the next few years will be on – imported coal substitution, completing ongoing cost-efficiency improvement projects, manpower reduction and rationalising loss-making mines; 4) CIL is not facing any liquidity crunch and, although receivables have increased, it expects the situation to improve, particularly with the help of Rs900bn PFC/REC scheme; 5) company is preparing a comprehensive dividend policy.
As coal demand pickup is contingent on economic activity in FY21, and predictability remains low, we cut our FY21E production target to 605mnte (from 630mnte) and our target price to Rs264 (from Rs284). Maintain BUY.
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