SAIL shares surge as Nuvama upgrades to 'buy' after 40% fall in stock price from highs

SAIL's shares have tumbled over 40 percent from its 52-week high.

Shares of state-owned public sector undertaking Steel Authority of India Ltd. or SAIL shares surged over 4 percent in trade on February 13, recording sharp gains after domestic brokerage Nuvama Institutional Equities upgraded the stock on its positive earnings for the quarter ended December.

SAIL reported a consolidated net profit of Rs 142 crore for the quarter which ended on December 31, 2024. This however marks a fall of nearly 66 percent from the Rs 423 crore net profit reported in the corresponding quarter of the previous financial year.

Its revenue from operations improved 5 percent year-on-year to Rs 24,490 crore during Q3 FY25. It had earlier reported revenue from operations at Rs 23,349 crore for Q3 FY24. The company's standalone EBITDA marginally increased by nearly 3 percent on-year to Rs 2,389 crore. Its sales volume meanwhile improved to 4.43 million tonne.

At 11.52 am, shares of the firm were quoting Rs 110.56, higher by 4.6 percent on the NSE compared to the previous close.

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The brokerage upgraded the stock to 'buy' from 'reduce' earlier, bumping up its target to Rs 123 per share, from Rs 112 earlier, as SAIL's shares have fallen over 40 percent from its 52-week high.

Nuvama expects EBITDA/t for SAIL to average between Rs 5,400-6,600/t in FY25 & FY26, compared to Rs 4,430 during FY13-22, primarily as a result of higher gross margins and higher volumes. The capex on next phase of expansion to accrue from H2FY26 onwards which limits any deleveraging.

Nuvama Institutional Equities said, "We expect lower coking coal prices to improve gross margin and in turn drive a 20% EBITDA CAGR over FY25–27E. Debt is likely to stay elevated amid ~15mtpa expansion plan. SAIL will be the biggest beneficiary of any imposition of safeguard duty on steel imports.

SAIL's gross debt fell by Rs 1,860 crore QoQ to Rs 39,380 crore amid release of working capital. The brokerage further expects it to reduce to ~Rs 35,900 crore by FY25-end.

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