SAIL Q2 Review - Net Debt Declines Further; Limited Deleveraging Ahead With Capex Lined Up: Motilal Oswal

Motilal Oswal Report

In Q2 FY24, Steel Authority of India Ltd. received a one-time revenue and Ebitda gain of Rs 17.5 billion related to rail price revision for FY22. This is as per the recommendation of the Office of the Chief Adviser (Cost), Ministry of Finance.

For a like-to-like comparison, we have adjusted Q2 FY24 financials by excluding this one-time gain.

SAIL’s revenue was up 7% YoY at Rs 280 billion in Q2 FY24, higher than our estimate of Rs 255 billion, driven by better-than-expected volumes, which was offset by lower average selling price. ASP for Q2 FY24 stood at Rs 58,256/tonne, lower than our estimate of Rs 60,679/tonne.

SAIL recorded its highest Q2 crude steel production at 4.8 million tonne (up 18% YoY), higher than our estimate of 4.2 mt. SAIL also achieved the highest-ever Q2 sales volume at 4.8 mt (up 14% YoY), higher than our estimate of 4.2 mt.

Ebitda grew 189% YoY to Rs 21 billion, in line with our estimate of Rs 23 billion. Ebitda was supported by lower coking coal prices and better volume mix.

SAIL reported adjusted profit after tax of Rs 3 billion, which was lower than our estimate of Rs 7 billion. Lower than expected other income and higher tax outgo impacted APAT.

In Q2 FY24, SAIL made a provision for the settlement of contractual disputes amounting to Rs 4.1 billion under Vivad se Vishwas Scheme -II. 

Bhilai plant clocked one of the highest revenues at Rs 100 billion (up 45% YoY). Its major five plants posted profits in Q2 FY24 and H1 FY24.

Net debt inched down to Rs 247 billion at Q2 FY24 end (versus Rs 250 billion at FY23-end).

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