SAIL declines on profit-booking after swinging into black in Q2

So far this year, the stock of this steel major has surged 7 percent as against 6 percent rise in the benchmark Sensex

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The share of Steel Authority of India (SAIL) traded 2 percent down on the November 13 morning after investors rushed to book profits after the company swung into black, posting net profit of Rs 1,305 crore in the July-September quarter driven by higher sales volume.

The company’s total income jumped 12 percent on-year to Rs 29,858.19 crore, while expenses were flat at Rs 27,768 crore.

During the quarter, SAIL's crude steel production rose to 4.80 million tonne (MT) from 4.30 MT in July-September 2022. Sales improved to 4.77 MT in the quarter from 4.21 MT in the year-ago period.

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Analysts at Morgan Stanley shared an “equal-weight” rating on the stock, with a target price of Rs 80.

“SAIL’s Q2 Ebitda performance was upbeat but we believe that the underlying remains weak. Volumes and realisations, however, proved to be on a strong foot during the quarter,” they wrote in a post-result review note.

Analysts at Motilal Oswal were ‘neutral’ on SAIL after the company’s Q2 performance exceeded estimates led by higher volumes and lower input costs.

ALSO READ: India's steel capacity crosses 161 MT mark: Secretary Nagendra Sinha

All major five plants of SAIL posted profit in Q2FY24 and H1FY24. Rourkela, Bokaro, and IISCO performed better and grew 15 percent, 8 percent, and 28 percent YoY, respectively. The Bhilai plant posted one of the highest revenues, up 45 percent YoY in Q2FY24.

Valuation-wise, shares of SAIL were trading at 11 times (x) price-to-earnings (PE) ratio, lower than sector’s mean of 15x PE multiple. Peers like Jindal Stainless and Shyam Metalics traded at 15x PE multiple and 12x PE multiple, respectively.

At 11.20 am, the stock was trading at Rs 89.95 on the BSE, down 0.71 percent from the previous close.

The steel major stock has surged 7 percent against a 6 percent rise in the benchmark Sensex. The stock hit a 52-week high of Rs 103 on September 4, 2023.

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