Steel Authority of India (SAIL) Ltd. share price target

We maintain our HOLD rating.

Q2 results flattered by prior-period rail revenue recovery; underlying EBITDA margin flattish sequentially while volume recovered

Steel Authority of India’s (SAIL) Q1FY24 EBITDA at INR 16.5bn was 38% ahead of our estimate mainly due to better-than-expected realisation. Key highlights: 1) EBITDA/te at INR 4,250 was ahead of our estimate of INR 3,074; 2) coking coal price was up a mere USD 10/te QoQ; 3) borrowings increased by INR 37.5bn mainly due to working capital accretion; and 4) next round of 15mtpa brownfield capex to gather pace.

Recommendation: With the recent run-up in prices, we don't see much upside from the CMP. Our TP implies 5% upside and hence we downgrade our rating from BUY to HOLD.

Q1 EBITDA/t drops 42% YoY to Rs 4.2k/t, reflecting the impact of high operating leverage

Recommendation: We maintain a BUY on the stock on a less Capex-intensive phase for at least a couple of years.

Steel Authority of India’s (SAIL) Q4FY23 EBITDA undershot our and consensus estimate by 11% and 13%, respectively. Key takeaways: 1) Sales volume rose 12.7% QoQ (down 0.6% YoY), similar to peers due to weakness in domestic demand in Jan’23 and Feb’23.