Moneycontrol Pro: SAIL in focus, here's why

In a few ideas for profit from Moneycontrol Pro, Nandish Shah of Moneycontrol.Com talks about a stock that he is tracking closely, Steel Authority of India Ltd (SAIL).

SAIL is one of largest steel makers of India and owns and operates five integrated plants. It is the second largest producers of iron ore in India and makes 100 percent of its requirements from captive mines.

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For FY23 it targets 18 million tonne of sales volume as against 16.2 million tonne in FY22. SAIL has increased steel prices by nearly Rs 10,000-12,000 per tonne compared to December 2021 prices on the back of higher raw material.

Recent correction in coking coal prices from around $650 per tonne to $450 per tonne will help in improvement of profitability in the first half of FY23. Net debt of the company peaked in FY20 at Rs 54,000 crore and is likely to end in FY22 at around Rs 17,000 crore and Rs 5,000 crore by FY24 on the back of reduced capex and higher operating cashflows.

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SAIL remains in a sweet spot with higher demand of steel from various segments, lower coking coal prices, operating leverage along with reduction of debt. SAIL is trading at 3 times EV/EBITDA based on FY23 earnings.