'Hurt the most': Why Nuvama cuts SAIL share price target by 25%
SAIL: Nuvama said there an adverse supply outlook for flat steel, weak margin visibility and an impending capex-led rise in leverage that could further strain returns.
- Dec 18, 2025,
- Updated Dec 18, 2025 1:40 PM IST
Nuvama on Thursday cut its target price on Steel Authority of India (SAIL) by 25 per cent, citing the PSU steelmaker’s higher vulnerability to weak steel margins amid an oversupply scenario in flat steel over FY26–28.
Nuvama said there an adverse supply outlook for flat steel, weak margin visibility and an impending capex-led rise in leverage that could further strain returns.
It said an excess supply scenario in India’s flat steel segment over FY26–28 is likely to weigh on steel prices and margins, with SAIL’s low earnings base leaving it the most vulnerable among large producers.
"On the back of an excess supply scenario in flat steel in India and low earnings base of SAIL, its earnings are likely to be hurt the most due to weak steel margins," Nuvama said.
Nuvama also flagged the start of capex for the 4.5 mtpa IISCO expansion, which is expected to push up debt at a time when return ratios remained subdued. It estimated SAIL’s return on equity (RoE) at just 3.2 per cent in FY26E, improving to 6.4 per cent and 6.5 per cent in FY27E and FY28E.
Reflecting weaker margin assumptions, Nuvama cut its FY26, FY27 and FY28 Ebitda estimates by 17 per cent, 13 per cent and 13 per cent, respectively, despite still building in a Rs 3,000–3,500 per tonne steel price increase in Q4FY26.
It downgraded the stock to ‘Reduce’ from ‘Hold’ and slashed the target price to Rs 106 from Rs 141, valuing SAIL at 6 times FY28E EV/Ebitda. At the current market price, the stock traded at what the brokerage termed expensive multiples of 6.9 times FY27E and FY28E EV/Ebitda.
Nuvama said SAIL’s near-term earnings are likely to be hit by weak steel prices and rising input costs. It expects Ebitda to fall around 30 per cent quarter-on-quarter in Q3FY26, with Ebitda per tonne slipping to about Rs 3,700, down roughly Rs 1,400 from the previous quarter.
At prevailing steel and coking coal prices, SAIL’s Ebitda per tonne could drop to around Rs 2,100, it said. While steel prices were believed to have bottomed out, higher coking coal prices were likely to offset part of any recovery in steel realisations.
On the balance sheet, Nuvama said SAIL was likely to begin the ordering process for the 4.5 mtpa IISCO expansion by January 2026, with estimated capex of around Rs 33,000 crore and commissioning expected by FY30E. Given weak earnings and rising capital expenditure, net debt was projected to climb to about Rs 37,400 crore by end-FY28, taking net debt-to-Ebitda to 2.8 times. Although debt servicing was not a concern, the brokerage said higher leverage would limit equity upside.
Nuvama said the risk-reward remained unfavourable. Even after earnings cuts, its projected Ebitda per tonne for FY27E and FY28E stayed above the company’s long-term average, leaving limited room for disappointment. Unless steel margins saw a sharp and sustained improvement, SAIL’s earnings and returns are likely to lag peers, prompting the downgrade, it said.
Nuvama on Thursday cut its target price on Steel Authority of India (SAIL) by 25 per cent, citing the PSU steelmaker’s higher vulnerability to weak steel margins amid an oversupply scenario in flat steel over FY26–28.
Nuvama said there an adverse supply outlook for flat steel, weak margin visibility and an impending capex-led rise in leverage that could further strain returns.
It said an excess supply scenario in India’s flat steel segment over FY26–28 is likely to weigh on steel prices and margins, with SAIL’s low earnings base leaving it the most vulnerable among large producers.
"On the back of an excess supply scenario in flat steel in India and low earnings base of SAIL, its earnings are likely to be hurt the most due to weak steel margins," Nuvama said.
Nuvama also flagged the start of capex for the 4.5 mtpa IISCO expansion, which is expected to push up debt at a time when return ratios remained subdued. It estimated SAIL’s return on equity (RoE) at just 3.2 per cent in FY26E, improving to 6.4 per cent and 6.5 per cent in FY27E and FY28E.
Reflecting weaker margin assumptions, Nuvama cut its FY26, FY27 and FY28 Ebitda estimates by 17 per cent, 13 per cent and 13 per cent, respectively, despite still building in a Rs 3,000–3,500 per tonne steel price increase in Q4FY26.
It downgraded the stock to ‘Reduce’ from ‘Hold’ and slashed the target price to Rs 106 from Rs 141, valuing SAIL at 6 times FY28E EV/Ebitda. At the current market price, the stock traded at what the brokerage termed expensive multiples of 6.9 times FY27E and FY28E EV/Ebitda.
Nuvama said SAIL’s near-term earnings are likely to be hit by weak steel prices and rising input costs. It expects Ebitda to fall around 30 per cent quarter-on-quarter in Q3FY26, with Ebitda per tonne slipping to about Rs 3,700, down roughly Rs 1,400 from the previous quarter.
At prevailing steel and coking coal prices, SAIL’s Ebitda per tonne could drop to around Rs 2,100, it said. While steel prices were believed to have bottomed out, higher coking coal prices were likely to offset part of any recovery in steel realisations.
On the balance sheet, Nuvama said SAIL was likely to begin the ordering process for the 4.5 mtpa IISCO expansion by January 2026, with estimated capex of around Rs 33,000 crore and commissioning expected by FY30E. Given weak earnings and rising capital expenditure, net debt was projected to climb to about Rs 37,400 crore by end-FY28, taking net debt-to-Ebitda to 2.8 times. Although debt servicing was not a concern, the brokerage said higher leverage would limit equity upside.
Nuvama said the risk-reward remained unfavourable. Even after earnings cuts, its projected Ebitda per tonne for FY27E and FY28E stayed above the company’s long-term average, leaving limited room for disappointment. Unless steel margins saw a sharp and sustained improvement, SAIL’s earnings and returns are likely to lag peers, prompting the downgrade, it said.