Citi maintains sell on SAIL with target price of Rs 75

Moneycontrol Bureau

Brokerage house Citi has maintained its ‘sell’ rating on Steel Authority of India, after the company’s third quarter net profit fell 53 percent year-on-year because of sluggish sales and lower realization.

SAIL’s average realizations fell 5 percent year-on-year and 6 percent quarter-on-quarter. Domestic HRC (hot rolled coil) prices have corrected from Rs 36,000/t in Apr12 to  around Rs32,000/t now (discount to import parity). While a price hike has been taken in Jan 13, there are concerns around sustainability,” the Citi note said.

Citi says the company’s valuations appear stretched at the current share price due to limited upside to steel prices, downside risk to volumes and likely cost pressures because of higher wages.