Comments
Motilal Oswal
SAIL (Buy)
Target:₹142
CMP: ₹114.6
The management has reiterated its decision to turn net debt zero by Q1FY23. The company has already made cumulative provisions of ₹20 b towards wage revision, and we believe any further provision may not be material. Additionally, the company would benefit from the normal attrition process (retirement). Positions have not been filled completely due to process improvements, automation, and productivity improvements.
Furthermore, the replacements are at a significantly lower cost, with higher productivity.
SAIL has higher exposure to the construction segment vis-à-vis peers. Hence, any revival in the construction segment in Q4 should help the company improve its margins on a q-o-q basis. It also has a lower proportion of exports compared with peers – which are likely to witness a sharper correction in NSR (v/s SAIL) as export opportunities have reduced sharply in Q3FY22. While coking coal prices would impact Q3FY22 margins significantly, we believe this is already priced-in.
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