The SAIL rally is over, warn analysts

Net sales declined 7% year-on-year and 21% quarter-on-quarter to ₹23,300 crore, mostly in-line with estimates of ₹23,100 crore. However, EBITDA was

up 3% YoY but down 45% QoQ to ₹2100 crore, above estimates of ₹1,100 crore.

Given the lag impact of high coking coal price and soft steel prices, margin may come under pressure, said Elara Capital in its investor note. The brokerage further said the recent suspension of key officers in the company may slow down decision making process.

Elara highlighted that an absence of any major capacity addition in the next two years may result in SAIL’s underperformance as against its peers on the volume front.

"While we largely retain FY25E-26E EBITDA estimate, we cut it 10% for FY24E, to factor in weak volume in Q3FY24," it noted.

Motilal Oswal in its report said 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 house stated.

"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%, 4.5% and 3.5%," Motilal said.

Reiterating its 'Neutral' rating on the counter, Motilal said the stock is fully priced in at current levels. It has a revised target price of ₹130 per share.