SAIL Q4 Results Review: Earnings Beat On Higher Volumes; Pricing Pressure Eases; Systematix Maintains 'Hold'

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Systematix Report

Steel Authority of India Ltd.'s earnings growth in the near to medium term is likely to be favored by strengthening steel prices and softer raw material costs. Implementation of 12% safeguard duty on HRC imports has relieved pricing pressure, especially for flat steel, the impact of which will be visible through H1 FY26.

We raise our FY26E/FY27E Ebitda by 8.2%/7.3% and keep the target multiple unchanged at 5.5x FY27E EV/Ebitda. We expect SAIL to deliver a 3%/19%/53% revenue/Ebitda/PAT CAGR over FY25-FY27E, which will be largely driven by peak capacity utilisation, lower raw material costs, and improved realisations.

We value SAIL at 5.5x FY27E EV/Ebitda with a target price of Rs 114/share, implying a 12% downside from current market price, after factoring in higher debt and ascribing NIL value to SAIL’s CWIP.

The plateauing steel sales volume trajectory is SAIL’s key limitation, accompanied by limited visibility on its long-term expansion strategy as it approaches its 35mt capacity target year of 2031.

We believe the 15mt expansion is unlikely in less than six years, as evidenced by its previous capacity expansion track record. These factors may restrict the stock’s potential for re-rating relative to its peers, in our view. Maintain Hold.

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