SAIL Q1 Results Review - Subpar Performance Driven By Lower Volumes: IDBI Capital

IDBI Capital Report

Steel Authority of India Ltd.’s Q1 FY25 performance was below our forecast. Revenue fell by 14.2% QoQ to Rs 253 billion due to a volume decline of 12.1% QoQ, driven by an influx of cheap Chinese imports, a heat wave and general elections. Despite this, SAIL slightly increased its sales volume guidance from 19 million tonne to 19.26 mt for FY25.

Ebitda decreased by 36.1% QoQ to Rs 22 billion, and Ebitda/tonne decreased by 27.4% QoQ to Rs 5,535. SAIL’s net debt increased by Rs 56 billion QoQ to Rs 356.6 billion, due to inventory buildup of coking coal and semi-finished products.

We cut our FY25/FY26 Ebitda forecast by 10% each, factoring lower steel prices. We now value the stock at enterprise value/Ebitda multiple of 6.5 times FY26E Ebitda and arrive at target price of Rs 129, given healthy demand outlook for domestic steel sector and robust volume guidance for FY25. We maintain our Hold rating on the stock.

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