Experts put 'Buy' rating on SAIL

The experts have suggested a BUY recommendation for the Steel Authority of India Limited (SAIL) at a target price of Rs 94 per share.

SAIL is one of the largest steel-making companies in India and one of the Maharatnas of the country's Central Public Sector Enterprises. SAIL manufactures and sells a broad range of steel products including special steel used in defence manufacturing.

During the latest quarterly results the company has reported a growth of 19.6 per cent in sales at Rs 19,614 million as against Rs 16,405 million in Q3-FY20. The company's operating profit margins stood at 27 per cent at Rs 5,294 million for the quarter against 7.2 per cent at Rs 1,186 million YoY, one of the highest operating margins, according to an analytical report by Anand Rathi research group. The improvement in operating performance was mainly due to higher realisation. In terms of volume, the company's steel sales rose 1.5 per cent YoY to 4.15 million tonnes. For the nine month period the company's sales stood at 10.6 million tonnes.

During the current financial year, domestic demand had been impacted on account of Covid-19 during the initial months. However, the company has seized the opportunity available in the international market by exporting about 1.52 million tonnes during the period as against 0.85 million. tonnes during YoY. Further, the domestic markets have also started to recover which has reflected in positive current quarter performance.

In terms of balance sheet, the company has also continued to reduce debt which stood at Rs 466.1 billion in Q3-FY21 as against Rs 541.3 billion in Q4-FY20, a reduction of ~14 per cent. The company has guided its net debt to fall below Rs 400 billion by Q4-FY21. The management is also expected to revise employee costs and has guided it to increase by about 10 per cent in Q4-FY21.

(Source: Anand Rathi research group)