Centrum has downgraded Steel Authority of India Ltd (SAIL) to “Sell” from “Neutral” and raised the target price to Rs 160 from Rs 140, citing weaker risk-reward despite a stronger-than-expected Q4FY26 earnings performance. Shares of SAIL closed at Rs 192.35 per share on Friday, May 15.
SAIL reported a mixed March quarter, with revenue broadly in line with estimates while EBITDA surpassed both brokerage and Street expectations, aided by stronger steel realisations. Standalone net sales rose around 5 per cent year-on-year and 13 per cent quarter-on-quarter to nearly Rs 308 billion, compared with Centrum’s estimate of Rs 311 billion and consensus estimates of Rs 313 billion.
EBITDA jumped about 27 per cent YoY and 92 per cent QoQ to nearly Rs 44 billion, exceeding Centrum’s estimate of Rs 39 billion and consensus expectations of Rs 40 billion.
The brokerage noted that inventory reduction remained a key driver of deleveraging during FY26, with borrowings declining to around Rs 217 billion from Rs 298 billion in FY25. According to management, firm domestic steel prices are expected to offset the near-term impact of rising coking coal costs.
However, Centrum remains cautious on SAIL’s FY27 volume guidance of 22.5 million tonnes due to existing capacity constraints. The brokerage also highlighted the company’s elevated capital expenditure plans of around Rs 150 billion in FY27, increasing further to Rs 180-190 billion by FY28, which could slow deleveraging and potentially lead to a rise in leverage again.
Centrum said it has increased EBITDA estimates to factor in higher steel prices and now values the stock at 5.5x March 2028 estimated EV/EBITDA, assigning a 30 per cent weight to CWIP. Despite the revised target price, the brokerage sees around 17 per cent downside from current levels.
SAIL q4 results
SAIL posted an over 42 per cent rise in standalone net profit to Rs 1,680 crore during the March quarter of FY26, citing higher revenues.
The company had reported a net profit of Rs 1,178 crore in the year-ago period. During January-March, the company’s revenue from operations increased to Rs 30,813 crore from Rs 29,316 crore recorded in the fourth quarter of the preceding 2024-25 financial year, as per PTI.
The company’s board also approved a final dividend of Rs 2.35 per equity share for FY26. Annual net profit stood at Rs 3,233 crore as against Rs 2,148 crore registered in FY25. Revenue from operations was at Rs 1,10,810 crore during FY 26 as against Rs 1,02,478 crore a year ago.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions)
