Prabhudas Lilladher recommended hold rating on Steel Authority of India with a target price of Rs 86 in its research report dated August 07, 2018.
Prabhudas Lilladher's research report on Steel Authority of India
SAIL posted Q1FY19 earnings below our estimates due to lower than expected volumes and higher costs. Company increased its guidance of employee cost by ~17% to Rs88bn (PLe:Rs88bn) for FY19e due to better profitability. It continued to disappoint on the cost and volumes growth due to poor performance on stabilization of new capacities. We remain extremely positive on the sector given the structural change in operating by Chinese steel mills with profitability being the key focus area, closure of capacities in China for pollution control and firm global demand. We believe that Private sector companies are better candidates to play the sector given their high quality operations and better visibility.
Hence, we continue to maintain our Hold rating with TP of Rs86, EV/EBITDA of 6x FY20E.
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