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Hold Steel Authority of India: target of Rs 80: Sharekhan

Sharekhan recommended Hold rating on Steel Authority of India with a target price of Rs 80 in its research report dated May 24, 2022.

May 25, 2022 / 05:29 PM IST
 
 
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Sharekhan's research report on Steel Authority of India


SAIL’s Q4FY2022 consolidated operating profit of Rs. 4,338 crore slightly missed our estimate on lower-than-expected EBITDA margin. PAT of Rs. 2,471 crore beat estimates on higher other income. Miss in EBITDA margin at Rs. 9,217/tonne was on account of lower-than-expected blended realisation at Rs. 65,361/tonne. The company reported in-line saleable steel sales volumes of 4.7 mt. Recent imposition of 15% export duty on steel would result in a sharp decline in domestic steel price, while benefit of cut in coking coal import duty to nil (from 2.5% earlier) would be small at Rs. 750/tonne. Thus, we expect severe impact on margin and earnings of the steel sector and cut our FY2023E/FY2024E EBITDA by 47%/39% for SAIL.


Outlook


Weak earnings to impact growth capex, likely increase in debt and could lower sector valuation. Thus, we downgrade SAIL to Hold (from Buy earlier) with a lower PT of Rs. 80. The stock trades at 5.4x its FY2024E EV/EBITDA.


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first published: May 25, 2022 05:29 pm
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