Comments
Target: ₹112
CMP: ₹131.70
SAIL’s Q1-FY25 performance was below the consensus estimates owing to lower NSR and volumes. Due to the global steel pricing being under-pressure and China’s cheap steel imports showing continuous increase every month, SAIL’s quarterly performances have been impacted.
Imported coking coal cost for Q1-FY25 was in the range of ₹24,500/t and the indigenous coal cost was in the range of ₹13,500/t. Average coking coal cost was in the range of ₹23,000/t. Despite the coking coal prices falling during the quarter, SAIL won’t be seeing any benefit of the same due to higher inventory levels on the books. On the operational front, the sales volumes were lower on a QoQ basis, with saleable steel sales falling 12 per cent. The production on the other hand saw a 5.7 per cent fall on its hot metal production, 6.7 per cent fall on the crude steel production, and 11.4 per cent fall on the saleable steel production on a QoQ basis.
We cut our estimations for FY26E due to steel pricing remaining under-pressure. We believe that the challenging steel macro-environment along with no new incremental capacities or volumes kicking in over the next two years will cause a dent to the company’s earnings.
We value SAIL at 6x FY26E EV/EBITDA to arrive at our target price of ₹112/sh.
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