SAIL shares: Profit to peak in Q1? Why targets for PSU stock hinting at up to 35% downside

SAIL share price targets: Nuvama Institutional Equities has increased its target price on Steel Authority of India Ltd (SAIL) by 25 per cent to Rs 139 from Rs 111 apiece, following the PSU steelmaker's better-than-expected March quarter results. Yet, its target suggests a 28 per cent potential downside on SAIL. Nuvama is not alone. Equirus Securities also upped its target on the stock to Rs 125 from Rs 115, but its target on the Maharatna stock suggests a 25 per cent potential downside. 

Domestic steel prices, Equirus explained, remained near cyclical highs, supported by safeguard duties, resilient demand and elevated raw material costs. The current pricing environment, however, is unlikely to sustain amid rising external risks including weaker Chinese demand, global tariff-related disruptions, CBAM risks and potential pressure on domestic spending from higher crude prices, Equirus said. 

"In our view, current valuations already discount favourable pricing, despite the company entering a sizeable multi-year capex cycle of Rs 1,000bn+ that is likely to materially strain the balance sheet before incremental benefits emerge. With the stock trading at 6.3x FY27E EV/EBITDA, we maintain SHORT," ithe brokerage said. 

Nuvama has similar concerns. It said SAIL's profitability may peak out in the June quarter, with the brokerage expecting higher capex to keep debt levels high for SAIL. 

"We expect Q1FY27 Ebitda per tonne to be higher by Rs 1,000 at Rs 9,200 and is likely to peak out. FY27 Ebitda is expected to increase by 37 per cent YoY with Ebitda/t of Rs 7,803. Benefits of higher cash flows will be utilised for IISCO expansion. As a result, we expect net debt to rise 52 per cent over FY26–28E to Rs 46,500 crore with net debt/Ebitda at 3.1 times; retain REDUCE," Nuvama said.

While SAIL is set to benefit from firm domestic steel prices and higher sales volume in FY27, much of the near-term positives appear to be priced in, Elara said. This brokerage has a target of Rs 191 on the stock. The scrip settled at Rs 192.30 apiece on Friday.

"We believe the risk-reward remains balanced at current valuations amid elevated earnings cyclicality and uncertain global steel demand conditions. Accordingly, we have  a cautious stance and downgrade our rating to Reduce from Accumulate," Elara said.

HDFC Institutional Equities suggested a target of Rs 190 for the stock. It said SAIL is set to accelerate its capex outgo from FY27 onwards, which is likely to result  in higher debt and gearing on books.

Nuvama said SAIL's reported better-than-expected Q4FY26 with adjusted Ebitda of about Rs 4,400 crore against its estimate of Rs 3,920 crore.  

Adjusted Ebitda/t at Rs 8,282, up Rs 3,817/t, was higher than Nuvama's estimate of Rs 7,085/t. The beat, the brokerage said, was due to lower raw material cost. Earnings were driven by higher prices, partially offset by higher other expenses, Nuvama explained.