SAIL Q3 Results Review - Ebitda In Line; Net Debt Inches Up: Motilal Oswal

Motilal Oswal Report

Steel Authority of India Ltd.'s revenue was down 7% YoY at Rs 233 billion in Q3 FY24, lower than our estimate of Rs 261 billion. The miss in revenue was due to lower sales, partially offset by higher average selling price.

SAIL Q3 crude steel production stood at 4.6 million tonnes (increased 5% YoY), in line with our estimate of 4.4 million tonnes However, sales stood at 3.8 million tonnes (down 9% YoY), lower than our estimate of 4.4 million tonnes ASP for Q3 FY24 stood at 61,444/ tonne (up 2% YoY), in line with our estimate of 59,248/ tonne.

Ebitda stood at Rs 21 billion (up 3% YoY), in line with our estimate of Rs 21 billion. The performance was due to improvement in ASP, reduction in manufacturing cost and employee expenses, offset by an increase in coal expense and lower sales volumes.

Adjusted profit after tax stood at Rs 3.5 billion, up 36% against our estimate of Rs 2.5 billion.

In nine months FY24, revenue came in at Rs 757 billion (flat YoY); Ebitda stood at Rs 59 billion (up 16% YoY), and APAT stood at Rs 9 billion (up 26% YoY). SAIL achieved the highest ever crude steel production over nine month FY24 at 14.2 million tonne (up 6% YoY) and sales stood at 12.5 million tonne (up 8% YoY).

All five major plants of SAIL reported profits in Q3 FY24 and nine month FY24. However, Indian Iron and Steel Company, Visvesvaraya Iron and Steel Plant., and Salem posted operating losses during the quarter.

The debt during Q3 FY24 increased by Rs 26 billion to Rs 281 billion. The increase in debt was due to lower revenues and higher coal cost, leading to increase in working capital debt. SAIL has declared an interim dividend of Rs 1/share (record date February 20).

We believe that the stock is fully priced in at current levels. We reiterate our 'Neutral' rating on the stock with a revised target price of Rs 130.

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