Reduce Steel Authority of India: target of Rs 120: ICICI Securities

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26 Aug, 2025 12:21

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SAIL’s Q2FY26 reported EBITDA, at INR 25.2bn, was 23% better than our estimates, driven by higher sales volumes, better by-product sales and operating leverage. Key highlights: 1) Sales volumes grew 20%/8% YoY/QoQ to 4.9mn tonnes (including 0.3mn of NMDC Steel). 2) Though realisation fall was in-line, at INR 2,583/te, by-products’ sales rose 31% QoQ (INR 11.4bn in sales; 20–25% flowed to EBITDA), which coupled with operating leverage (employee and other expenses, both down by 7% QoQ on per tonnes basis), led the outperformance. 3) Net debt fell by INR 23 sequentially to INR 264bn. SAIL’s volume growth will likely be subdued, considering the company is already running at optimum levels. We downgrade the stock to REDUCE, from Hold, with a nearly unchanged TP of INR 120 (6x FY28E EV/EBITDA).

We are rolling forward our target multiple to FY28E, and we arrive at a target price of INR 120 (6x FY28E EV/EBITDA). We downgrade the stock to REDUCE, from Hold.

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