Hold Steel Authority of India; target of Rs 151: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Steel Authority of India with a target price of Rs 151 in its research report dated February 02, 2026.

Broker Research

February 03, 2026 / 13:56 IST

hold

Prabhudas Lilladher's research report on Steel Authority of India

SAIL delivered strong operating performance in Q3FY26, driven by 7.4% YoY volume growth (ex. NMDC Steel trading volumes of 0.37mt) and higher OOI worth Rs12.8bn. However, weaker steel prices limited EBITDA/t to Rs4,465/t. Management expects sequential improvement in EBIDTA/t, supported by rising demand, inventory liquidation (holds 1.5mt finished), and rising steel prices across flats (~Rs3,500/t) and longs (~Rs2,500). However, we believe sharp rise in coking coal prices may limit the EBITDA/t expansion in the next 2 quarters. SAIL has increased its FY27 capex guidance considering ISP expansion and it would further intensify in FY28/29E. Although SAIL will benefit from higher steel prices in near term, EBITDA expansion will also be limited due to sharp rise in coking coal prices which will hit in subsequent quarters. ISP expansion would drive volumes from FY30E provided timely execution. Most of the order placement for 4.5mtpa ISP project has been completed and groundwork has begun. Other debottlenecking and VAP projects at DSP (1mtpa TMT in H2FY28 and 1mtpa BF), RSP and BSP are on track. We expect SAIL to remain a play on steel prices as long-term volume growth would depend upon timely execution of planned capex.

Outlook

We raise our FY27/28E EBITDA estimates by ~9/12% on higher steel prices and a gradual tapering of coking coal costs but TP gets restricted on higher capex outflow and incremental debt. At CMP, the stock is trading at an EV of 5.5x/5.4x FY27/FY28E EBITDA which appear full considering rising leverage and weak execution pedigree. Maintain ‘Hold’ with revised TP of Rs151 (Rs141 earlier) giving same 5.5x Sep’27E EV/EBITDA.

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