SAIL share price target: Down 18% in 5 sessions, will this PSU stock fall further?

Shares of Steel Authority of India Ltd (SAIL) have fallen 18 per cent from its 52-week high of Rs 150 level hit on February 7, reducing its one-year gains to 46 per cent. SAIL's Q3 results disappointed Street, with profit dropping 22 per cent YoY on 7 per cent fall in revenue; debt also increased by Rs 2,600 crore to Rs 28,100 crore on higher coal cost that led to rise in working capital debt.

Motilal Oswal Securities noted that SAIL is planning to undertake multiple expansion capex to augment the installed capacity to 35mt by FY30-31. But considering that no new facilities would come on stream over the next two to three years, SAIL will focus on enhancing the existing productivity and ramping up the utilization levels, the domestic brokerage said.

"As the capex intensity is expected to pick up post FY25/FY26, it would limit the deleveraging going ahead, and thereby, exert pressure on the balance sheet and cash flow. In line with 3QFY24 financial performance and improved outlook, we have slightly improved FY24E/FY25E/FY26E Ebitda estimates by 1.4 per cent, 4.5 per cent and 3.5 per cent," Motilal Oswal said.

Nuvama said SAIL may record loss at PBT level in the March quarter unless it captures railway price revision benefit for FY23, which is still due. The operational performance would be hurt by higher coking coal price and lower steel realisation, it said.

"SAIL is yet to start capex on next phase of expansion (guides capacity increase by 15mt by FY31), which shall not allow for any major debt reduction. We rollover to FY26 with a target of Rs 96 from Rs 81 earlier, valuing at 5 times FY26 EV/Ebitda," it said.

SAIL trades at an FY26E EV/Ebitda of 5.8 times, said Motilal Oswal. It believes that the stock is fully priced in at current levels. "We reiterate our Neutral rating on the stock with a revised target of Rs 130," it said.

:The SAIL management expects domestic steel demand to remain steady in FY24. Higher sales volume in 4QFY24 could help partially offset lower realizations. We maintain HOLD as volume growth prospects remain muted and deleveraging prospects might get impacted, given the capex outlay FY26 onwards. We factor in lower costs FY25 onwards and arrive at a target price of Rs 119 (Rs 106 earlier) with target 5.5 times FY26 EV/Ebitda multiple," said Antique Stock Broking.

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