SAIL shares: Maharatna PSU stock up 95% in 6 months. Should you, buy, hold or sell?
SAIL share price target: SAIL trades at an estimated FY26 EV/Ebitda of 7 times. Motilal Oswal said the stock is fully priced in at current levels. It suggested a revised target of Rs 170 on the stock.
- May 22, 2024,
- Updated May 22, 2024 8:39 AM IST
Maharatna PSU: Steel Authority of India Ltd (SAIL) Q4 results were a mixed bag, with revenue coming in in line with analyst estimates but Ebitda falling below their projections. Analysts said the recent rise in steel prices is already in the price and suggested that a pick up in capex intensity to limit SAIL's deleveraging drive. They largely have 'Neutral' or 'Reduce' rating on the PSU stock for now.
Motilal Oswal said SAIL is planning to undertake multiple expansions to reach the installed capacity of 35 mt by FY30-31. It believes that there will be no new facilities coming on stream in the next 2-3 years, as the company will focus on ramping up utilisation levels and enhancing existing productivity.
As SAIL's capex intensity is likely to pick up after FY25/FY26, it would limit its deleveraging and exert pressure on the balance sheet and cash flow, the domestic brokerage said.
"We raise our Ebitda estimates by 2 per cent/3 per cent for FY25/26, envisaging lower coking coal costs. SAIL trades at an estimated FY26 EV/Ebitda of 7 times. We believe that the stock is fully priced in at current levels," Motilal Oswal said while suggested a revised target of Rs 170.
Kotak Institutional Equites said SAIL’s 4QFY24 Ebitda came much below its estimates led by lower realisations. It said a recovery in spreads, led by higher prices and lower coking coal cost should elevate margins in H1FY25.
"Net debt increased sequentially in 4QFY24 with net debt/Ebitda at 2.7 times as of FY2024 without any growth capex. SAIL is evaluating various expansion projects, which could further weaken the balance sheet, similar to the last decade once it starts capex. We increase earnings factoring higher spreads and revise fair value to Rs 85 from Rs 70," Kotak said while calling SAIL's valuations as 'expensive'
Rising steel prices Prabhudas Lilladher said steel prices have improved over the past few weeks (especially Longs) while input prices declined substantially in the last quarter. "This shall improve margins in 1HFY25, however that is largely in price. The stock currently trades at an EV of 10 times/8.5 times FY25E/FY26 Ebitda. Maintain Reduce rating on the stock," it said.
SAIL Q1 Ebitda Nuvama said SAIL’s Q1FY25E Ebitda could be flat sequentially due to lower volume offset by softer coking coal cost. SAIL, it said, is losing market share and plans to undertake heavy capex -- incurring Rs 1,00,000–1,10,000 crore over FY26–31, to expand capacity by 15 mtpa.
"This would keep its net debt high. We maintain ‘Reduce’ with a target price of Rs 110 (earlier Rs 96), valuing the stock at 5.5 times (from 5x) FY26E EV/Ebitda," it said.
Maharatna PSU: Steel Authority of India Ltd (SAIL) Q4 results were a mixed bag, with revenue coming in in line with analyst estimates but Ebitda falling below their projections. Analysts said the recent rise in steel prices is already in the price and suggested that a pick up in capex intensity to limit SAIL's deleveraging drive. They largely have 'Neutral' or 'Reduce' rating on the PSU stock for now.
Motilal Oswal said SAIL is planning to undertake multiple expansions to reach the installed capacity of 35 mt by FY30-31. It believes that there will be no new facilities coming on stream in the next 2-3 years, as the company will focus on ramping up utilisation levels and enhancing existing productivity.
As SAIL's capex intensity is likely to pick up after FY25/FY26, it would limit its deleveraging and exert pressure on the balance sheet and cash flow, the domestic brokerage said.
"We raise our Ebitda estimates by 2 per cent/3 per cent for FY25/26, envisaging lower coking coal costs. SAIL trades at an estimated FY26 EV/Ebitda of 7 times. We believe that the stock is fully priced in at current levels," Motilal Oswal said while suggested a revised target of Rs 170.
Kotak Institutional Equites said SAIL’s 4QFY24 Ebitda came much below its estimates led by lower realisations. It said a recovery in spreads, led by higher prices and lower coking coal cost should elevate margins in H1FY25.
"Net debt increased sequentially in 4QFY24 with net debt/Ebitda at 2.7 times as of FY2024 without any growth capex. SAIL is evaluating various expansion projects, which could further weaken the balance sheet, similar to the last decade once it starts capex. We increase earnings factoring higher spreads and revise fair value to Rs 85 from Rs 70," Kotak said while calling SAIL's valuations as 'expensive'
Rising steel prices Prabhudas Lilladher said steel prices have improved over the past few weeks (especially Longs) while input prices declined substantially in the last quarter. "This shall improve margins in 1HFY25, however that is largely in price. The stock currently trades at an EV of 10 times/8.5 times FY25E/FY26 Ebitda. Maintain Reduce rating on the stock," it said.
SAIL Q1 Ebitda Nuvama said SAIL’s Q1FY25E Ebitda could be flat sequentially due to lower volume offset by softer coking coal cost. SAIL, it said, is losing market share and plans to undertake heavy capex -- incurring Rs 1,00,000–1,10,000 crore over FY26–31, to expand capacity by 15 mtpa.
"This would keep its net debt high. We maintain ‘Reduce’ with a target price of Rs 110 (earlier Rs 96), valuing the stock at 5.5 times (from 5x) FY26E EV/Ebitda," it said.