Buy SAIL; target of Rs 230: Anand Rathi

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Cost structure improvement: Near-term cost increase to be offset by ASP uptick, with global coking coal prices expected to soften towards ~Rs22k/tonne by Q4FY27.
  • Capacity expansion: SAIL targets ~75% capacity expansion to ~35m tonne by FY30-32e, led by IISCO, Rourkela, Bokaro, and Bhilai, supporting volume growth.
  • Iron ore production: SAIL aims to reach 100m tonne iron ore production by FY31-32e, driven by Rowghat, Gua, and Bolani, Kalta, and Taldih mines.
  • Debt funding: SAIL to fund capex via internal accrual and debt, with expected gross debt increase of ~50% over the next few years.

Thesis Validation Checklist

To validate the thesis, watch for: steel price realization, coal cost moderation, capacity utilization, and iron ore production growth. Key risks include increase in RoI, temporary impact of VRS/wage revision, reduction in steel prices, and further rise in RM and global freight cost.