14 Apr , 2022 By : monika singh
CIL’s March-22 e-auction premium (290%) was at record high (February: 120%) with volumes doubling month-on-month to 7.9 MT. CIL’s offtake in April-22 is up 8% YoY, driven by strong power demand ( 10% YoY MTD). In the medium term, we expect sustained elevated dispatches and a pick-up in non-power offtake once plant inventory is normalised.
Outstanding dues from the power sector fell sharply MoM by 2,700 crore to12,300 crore at end-FY22, the lowest in three years. This unlocks cash, and along with healthy cash flow generation, paves way for higher dividends. We expect further moderation in receivables during FY23.
Global coal prices remain elevated (despite recent fall) and are at significant premiums to CIL coal (grade adjusted). We believe higher prices are here to stay in the medium term and e-auction premiums should remain strong (last 6M: 137% and yet to flow through to P&L).
We expect the Street to upgrade estimates and see CIL maintaining its healthy dividend yield. While higher focus on power plants implies a non-optimal mix in the near term, volume growth (operating leverage) and higher unit realisations should aid profitability. Wage hikes and FSA price changes are key events. Maintain ‘Outperform’.
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