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

At the CMP of 82, SAIL is trading at 5.3X FY19 EV/Ebidta. We initiate

31 May 2018 SAILs operating performance continues improving, driven by the tailwind of strong demand and significantly better steel prices. 4QFY18 EBITDA increased 68% QoQ to INR26b (20% beat), driven by higher steel prices (+12%; 6% beat), partially offset by increased other operating expenses. EBITDA per ton increased 69% YoY to INR6,945. Interest and depreciation, too, increased due to capitalization of projects. INR5.8b provision toward an increase in cap on gratuity had a negative impact and INR3.3b w/back had a positive impact on the wage bill and PAT. Adj. PAT increased 3x QoQ to INR6b. EBITDA was INR52b (v/s INR380m in FY17) and adj. loss before tax reduced from INR27b to INR1.3b. Net debt increased by INR40b, while capex stood at INR51b for the full year. SAIL has done a commendable job in containing the wage bill from ballooning.

Exceeding ours and streets estimate by a wide margin, Steel Authority of India (SAIL) has reported a stellar performance on operating front in 2QFY18. Its EBITDA surged by 721% YoY to Rs9.1bn and compared to a Rs839mn EBITDA loss on a sequantial basis (vs. our estimate of Rs1.46bn) largely due to lower-than-estimated raw material cost. However, its sales volume declined by 1% YoY (+17% QoQ) to 3.54mnT (below our estimate of 3.9mnT). Net revenues surged by 21.3% YoY and 17.6% QoQ to Rs136bn, but was lower than our estimate due to lower volume. Realisation increased by 22% YoY (flat on sequential basis) to Rs38,424/tonne. Notably, revenue in 1QFY18 was aided by recognition of Rs2.5bn following finalisation of prices of rails supplied...

Steel Authority of India Ltd Q2FY18 results comment Revenue increased by 17.6% to Rs. 13617.42 Cr in Q2FY18 when compared to the previous quarter. Also, it grew by 21.31% when compared with Q2FY17.

Lower RM cost and higher volume drive EBITDA increase SAIL turned EBITDA positive at INR9.1b in 2QFY18 (7% beat), as against a loss of INR0.8b in 1QFY18, due to lower raw material costs and higher volumes. Interest cost rose 9% QoQ to INR6.4b and depreciation increased 10% QoQ to INR7.6b. Net exceptional charge of INR2.9b pertains to (a) excess mining case in Odisha and Jharkhand of INR3.3b, (b) VRS of INR2.1b and (c) DMF reversal gain of INR2.4b. Adj. net loss reduced from INR7.9b in 1QFY17 to INR3.2b (est. of INR6.6b). Sales grew 17% QoQ (-2% YoY) to 3.5mt. NSR increased just 1% QoQ to...

prices in 1QFY18, we expect its margins to improve with the stabilisation in coking coal prices and lower employee cost, going forward. Notably, SAIL continues to remain mostly exposed to long steel products, where the prices continue to remain volatile due to weak demand scenario and low steel scrap prices. Notebly, SAIL also does not benefit from exports as much as JSW Steel...

Revenue fell by 8.75% to Rs. 11579.56 Cr in Q1FY18 when compared to the previous quarter Revenue fell by 8.75% to Rs. 11579.56 Cr in Q1FY18 when compared to the previous quarter

Revenue grew by 13.63% to Rs. 12690.54 Cr in Q4FY17 when compared to the previous quarter Revenue grew by 13.63% to Rs. 12690.54 Cr in Q4FY17 when compared to the previous quarter

SAIL reported a subdued Q4FY17. The company reported a loss at the EBITDA level on account of elevated operating costs Sales volumes during the quarter came in at 3.45 million tonne (MT), down 9.2% YoY, up 4.5% QoQ broadly in line with our estimate of 3.4 MT. Gross revenues came in at | 14234.18 crore. After adjusting for excise, net revenues were at | 12690.5 crore, up 11.7% YoY, 12.3% QoQ, broadly in line with our estimate of | 12390.1 crore The company reported an EBITDA loss of | 264.4 crore against our...

Despite higher-than-expected exports, Steel Authority of India (SAIL) has reported largely inline numbers in 4QFY17 with its sales volume coming in at 3.45mnT vs. our estimate 3.6mnT. Its reported EBITDA/tonne loss stood at Rs767 vis--vis our estimate of Rs1,100 (loss) largely due to lower employee cost. Due to lower base with Voluntary Retirement Scheme (VRS) and usual superannuation of employees, SAIL's staff cost surprisingly declined by 13.3% YoY and 15% QoQ to Rs6,039/tonne. Realization rose by 23% YoY and 8% QoQ to Rs36,827/tonne (vs. our estimate of Rs36,437) due to higher share of value-added products in overall sales-mix. Looking ahead, though we expect SAIL to start reporting stronger numbers, it seems to have been priced in. Rolling over our estimates to FY19E, we upgrade our recommendation on...

Revenue grew by 0.81% to Rs. 11168.73 Cr in Q3FY17 when compared to the previous quarter. Also, it rose by 26.84% when compared with Q3FY16.

ICICI Securities Ltd | Retail Equity Research SAIL's Q3FY17 numbers were above our estimates. The better-thanexpected performance was primarily driven by higher-than-expected realisations. Blended realisations increased ~10% QoQ, higher than our expectation of an increase of ~7% Sales volumes during the quarter came in at 3.3 million tonne (MT), up 13.8% YoY, down 8.3% QoQ marginally higher estimate of 3.2 MT. Gross revenues were at | 12619.7 crore. After adjusting for excise, net revenues were at | 11298.2 crore, up 26.4% YoY, 0.6% QoQ and...

Higher Raw Material Cost & Lower Volume Dent Margins Steel Authority of India (SAIL) has reported largely in-line numbers in 3QFY17 with sales volume at 3.3mnT as expected, despite higher-than-expected exports. It posted an EBITDA/tonne loss of Rs130 (lower than our estimate of Rs185 loss) with the usage of domestic coking coal rising to 20% in 3QFY17 from 14% in 3QFY16. Further, lowcost coking coal inventory led to decline in average cost of coking coal to Rs13,195/ tonne vs. international comparative cost of ~Rs 15,000/tonne assuming the same blend. Realization rose by 11% YoY and 9% QoQ to Rs34,237/tonne (vs. our estimate of Rs34,747) due to higher share of exports in the overall sales-mix. However, with an...

Volumes surprise positively; Lower costs save the day Steel Authority of India Ltd (SAIL) reported decent numbers during the quarter under review. Sales volume at 3.56mn tonnes was considerably higher than our estimate of 2.9mn tonnes, largely due to higher exports. The company posted an EBITDA/tonne of Rs313 (our estimate loss of Rs368), the same was largely aided by adoption of IND-AS, which led to downward revision of many costs due to capitalization effect. Realization at Rs31,497/tonne fell 8% yoy and 5% qoq and was only marginally lower than our estimate of Rs31,843. EBITDA at Rs1.1bbn was aided by lower costs. SAIL reported an adjusted...

Dismal Show Continues; IND-AS Saved the Day Steel Authority of India Ltd. (SAIL) once again reported subpar numbers both on volume and realization fronts. Its EBITDA/tonne at Rs835 (vs. our estimated loss of Rs1,033), was largely aided by adoption of IND-AS, which led to downward revision of several costs owing to capitalization effect. Its sales volume rose by 4% yoy to 2.8mnT (-down 26% qoq) lower than our estimate of 3mnT. In contrast, its realization at Rs32,993/tonne fell 6.2% yoy (+10% qoq), marginally higher than our estimate of Rs32,679. Aided by lower costs, its EBITDA surged 164% yoy to Rs2.4bn post revision of 1QFY16 numbers...

SAIL reported a better-than-expected operational performance. The company reported a healthy EBITDA primarily on the back of higherthan-expected realisations and lower operating cost per tonne .The sales volume came in at 2.8 million tonnes (MT), up 3.7% YoY, down 26.3% QoQ and lower than our estimate of 3.2 MT. Subsequently, total operating income came in at | 9238.1 crore, down 2.7% YoY, 18.8% QoQ and lower than our estimate of | 10465.7 crore. Sales realisation in the quarter was at | 32437/tonne, up 8.4% QoQ. A significant operational performance at the Bokaro Steel plant registering a PBIT of | 55 crore against heavy losses both YoY, QoQ has been a key highlight of the turnaround achieved during the quarter. The company reported a healthy EBITDA of | 233.8 crore against losses both YoY and QoQ (significantly higher than our estimate of | 81.3 crore). The resultant EBITDA/tonne came in at | 835/tonne notably higher than our estimate of | 250/tonne. The better-thanexpected operating performance was primarily driven by healthy realisations and lower operating cost per tonne, which fell 9.4% YoY and 2.2% QoQ. The company reported a net loss of | 535.5 crore, which broadly came in line with our estimate of | 554 crore.

The company reported a better-than-expected operational performance on account of healthy realisation and lower operating costs. Going forward, we have maintained both sales volume and EBITDA/tonne estimates for FY17E and FY18E. We have valued the stock at 6.5x FY18E EV/EBITDA (from earlier 6x) given the turnaround at the EBITDA level after a few quarters and arrived at a target price of | 45. They have upgraded our recommendation on the stock to HOLD.

Volumes at record high; lower realization drags performance Despite sales volume being at the highest level recorded in any quarter, the quarterly numbers of Steel Authority of India (SAIL) came below our estimate. It has reported EBITDA loss for the fourth time in a row, but contracted sequentially due to higher volumes. Its revenue declined ~2% yoy (+27% qoq) to Rs114bn in 4QFY16 beating our estimate of Rs109bn, due to higher sales volume at 3.8mnT (up 20% yoy & 31% qoq) v/s our estimate of 3.35 mnT. SAIL posted an EBITDA loss of Rs11.2bn (v/s our estimate Rs4.3bn loss) and incurred Rs12.3bn net loss (v/s our estimate of Rs8.7bn loss)...

ICICI Securities Ltd | Retail Equity Research SAIL reported a dismal set of Q4FY16 numbers wherein the EBITDA and bottomline came in notably lower than our estimate, primarily on...