Neutral SAIL; target of Rs 85 : Motilal Oswal

Motilal Oswal's research report on SAIL

SAIL, one of the largest steel manufacturers in India with an annual capacity of ~21mt is all set to capture the growing steel demand amid expansion in infrastructure and construction. SAIL has five integrated steel plants at Bhilai, Durgapur, Rourkela, Bokaro and IISCO (Burnpur) along with three special steel plants at Salem, Durgapur and Bhadravati (Visvesvaraya) and one ferroalloy plant at Chandrapur. SAIL offers an entire gamut of steel products across flats, longs and semis with strong focus on value added products (VAP). The share of VAP stands at around 53% of the total volumes. SAIL has strong iron ore linkages and the entire iron ore requirement is met by captive mines, which ensure adequate supply of key raw materials. SAIL is the largest supplier of rails to Indian Railways. Between Apr ’22 and Mar ’23, SAIL has already produced ~1.4mt of railway materials (~9% of the total volumes).

Outlook

SAIL is trading at 4.9x our FY24E EV/EBITDA and we believe the current valuation is fully priced in. We reiterate our Neutral rating on the stock with a target price of INR85 (5x FY24E EV/EBITDA).