Hold Steel Authority of India; target of Rs 95: Sharekhan

Sharekhan recommended Hold rating on Steel Authority of India with a target price of Rs 95 in its research report dated August 11, 2023.

Broker Research

August 20, 2023 / 19:13 IST

hold

26 Aug, 2025 12:21

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Sharekhan's research report on Steel Authority of India

Q1 results were subdued as a rise in coking coal costs led to a miss of 10% in EBITDA margin at Rs. 4,250/tonne (down 32% q-o-q). Consequently, operating profit of Rs. 1,649 crore (down 44% q-o-q) was 10% below our estimates. Blended steel realisations improved marginally q-o-q but coking coal prices rose by Rs. 2,500/tonne and thus led to weak margins, while employee/other expenses fell by 17%/6% q-o-q. Steel sales volume increased by 23% y-o-y to 3.9 mt (in-line). The management guided for a strong 17% y-o-y growth in steel sales volume to 19 mt for FY24 and aims to reduce debt by Rs. 4,000-5,000 crore to Rs. 21,000-22,000 crore by endFY24. With a fall of Rs. 4500-5000/tonne q-o-q in imported coking coal price we see some recovery in steel spreads in Q2FY24. Capacity expansion plan to 35 mtpa by 2032 remain intact.

Outlook

We maintain a Hold rating on SAIL with a revised PT of Rs. 95 noting inexpensive valuation of 4.1x FY25E EV/EBITDA and 0.6x FY25E P/BV. We believe that a major balance sheet deleveraging cycle is largely complete as the company’s plan to expand capacities would require sizeable capex.

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