Buy Steel Authority of India; target of Rs 204: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • SAIL's Q2FY27 EBITDA was in-line with estimates, supported by strong sales volumes and elevated realisations, with blended steel realisation increasing by 14% YoY to INR 62,011/t.
  • The company plans to invest over INR 1trn in the next five years to expand capacity from 20mnt to 35mnt, with management expecting improved performance in H2FY27, supported by post-monsoon demand recovery and higher steel realisations.
  • SAIL's debt declined to INR 206bn from INR 217bn in Q1FY27, aided by inventory reduction, and the company expects to generate an estimated INR 7-9bn benefit during Q2FY27 from inventory reduction, higher sales, and improved dispatches.

Thesis Validation Checklist

  • Investors should watch for improved operating performance during H2FY27, supported by higher realisations and cost optimisation, as well as the company's ability to execute its expansion plans and manage its debt levels.
  • Key signals to monitor include sales volume growth, EBITDA/te expansion, and the company's progress in reducing its debt and improving its balance-sheet flexibility.
  • Any sharp increase in Chinese steel exports or coking coal prices could pose a risk to the thesis, and investors should closely monitor these factors.