Shares of Steel Authority of India Ltd (SAIL), a part of Big Bull Rakesh Jhunjhunwala's portfolio, have doubled investors' money in the last 12 months.
The large-cap stock has delivered more than 100 per cent return to its shareholders in the last 12 months. In the past one year, the share price jumped from Rs 54.7 to Rs 112.45 mark -- logging around 105 per cent return in this period.
The stock rose 2 per cent to hit an intraday high of Rs 112.45 against the previous close of Rs 110.15. With a market capitalisation of more than Rs 46,000 crore, the shares stand higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.
Should you buy, sell or hold?
"The metal stocks like SAIL have not only posted excellent earnings but have also provided more than a 100% return over the last year. SAIL is also deleveraging and increasing production and would gain from an accessible credit environment," Sonam Srivastava, Founder at Wright Research told BusinessToday.in.
"While the stock has been undergoing consolidation for some time, with the metal maker getting pricing power, demand remaining high, and profitability rising, the metal stock shall rise again soon, and the current weekly up move of 5 per cent could continue," she stated.
However, she noted that the metal stocks are tough to value, given that their prospects are linked to global supply-demand, commodity cycle, and company prospects.
She added that there is a consensus view that the metals sector is entering a supercycle with increased global demand for metals due to infrastructure push and shift to sustainable energy. The reduction in metals production by China gives an immediate boost to the metals industry in India.
Kranthi Bathini, equity strategist at WealthMills Securities said that the metal industry is cyclical in nature. Valuations of the stock are attractive at the current levels and the long-term investors may enter the stock for the target price of Rs 150.
The company reported a net profit of Rs 4,338.75 crore for the July-September quarter, recording an over 10-fold jump on a year-on-year basis. Profit in the year-ago period stood at Rs 436.52 crore. The company's total income grew 58 per cent year-on-year to Rs 27,007 crore.
During the quarter, the company's expenses stood at Rs 21 304.64 crore compared to Rs 16,733.29 crore in the year-ago period. The company's board also approved an interim dividend of Rs 4 per share for the current fiscal year.
"Gross borrowings were at Rs 22,478 crore as on September 30, 2021, against Rs 35,350 crore as on March 31, 2021, which is a reduction of Rs 12,872 crore during H1 FY22 (FY 2021-22)," the company said.
Big Bull stake
Ace investor Rakesh Jhunjhunwala held 7,25,00,000 shares or 1.76 per cent stake as of September 2021 against 1.39 per cent stake during the April-June period.
Jhunjhunwala added the metal stock to his portfolio in the quarter ended June 2021. He did not hold any stake in the March quarter.
JP Morgan upgraded the stock to overweight and raised the target price to Rs 165 from Rs 150 per share. The research firm believes that after the third quarter, costs should fall even as volumes and prices should be stable to higher in the second half.
According to IDBI Capital, the company's Q2 FY22 result was ahead of expectations backed by strong improvement in realizations.
The brokerage firm believes that rising coking coal price will impact its operating margin in the near term and has a target price of Rs 161 per share.
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