Hold Steel Authority of India; target of Rs 133: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Steel Authority of India with a target price of Rs 133 in its research report dated May 29, 2025.

Broker Research

May 30, 2025 / 10:56 IST

Hold

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Steel Authority of India

SAIL delivered a strong operating performance in Q4FY25 driven by 17% YoY volume growth (aided by 0.36mt of NMDC Steel volume tie up, ex-NSL 9%) amid stable domestic demand environment. Average NSR declined 2.2% QoQ amid weak steel pricing environment during the quarter. Steel prices started improving towards the end of Q4 in the anticipation of safeguard duty. Strong 9% volume growth and lower coking coal prices has resulted in EBITDA/t of Rs5,358 adjusting for prior period rail price revision impact of Rs6.25bn. Going forward, with higher steel pricing and muted coking coal prices, SAIL is expected to deliver strong 1HFY26 EBITDA. SAIL is undertaking largely sustenance and debottlenecking capex in the near term and actual growth capex cash outflow would start post mid-FY27. Mgmt. has reiterated its growth capex plans for 15mtpa expansion by FY31E at various sites. Tendering process at ISP has started and 0.5mtpa brownfield expansion is expected by FY28E. We expect SAIL to remain a play on steel prices as longterm volume growth would depend upon successful execution of planned capex.

Outlook

We increase our FY26/27E EBITDA estimates by ~6/3% taking into consideration higher volume assumptions aided by NSL. At CMP, the stock is trading at an EV of 6.9x/5.4x FY26/FY27E EBITDA. Maintain ‘Hold’ with revised TP of Rs133 (Rs118 earlier) giving 5.5x Mar’27E EV/EBITDA.

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