InCred upgrades SAIL to 'Add', lifts target; stable outlook supports upside

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Domestic brokerage firm InCred Equities has upgraded its rating on Steel Authority of India Limited (SAIL) to ‘Add’ from ‘Reduce’, while raising the target price to ₹158 from ₹77 earlier. The revised target suggests a potential upside of about 20 per cent from SAIL’s closing price of ₹129.46 on Friday, October 24, on the NSE.

 

According to the brokerage, the ratings upgrade is driven by stable steel prices under a protectionist regime. Additionally, the company’s captive iron ore advantage ensures long-term cost competitiveness, shielding margins from raw material price volatility.

 

On the bourses, however, SAIL shares traded largely flat, inching up 0.8 per cent to an intraday high of ₹130.5 before settling 0.41 per cent higher at ₹130 around 1:30 PM. In comparison, the NSE Nifty50 was up 0.57 per cent at 25,940.90.

Three key reasons behind InCred’s upgrade on SAIL:

Protectionism to help

According to analysts, while the global steel industry lacks structural pricing power, the current wave of protectionism across key markets, especially in India, Europe and the United States, has removed the downside risk to earnings. "Steel prices are unlikely to fall meaningfully, and the modest recovery in global demand, led by Europe, should support a stable pricing environment," analysts said in the note. Amid this, SAIL stands out as a tactical play on protectionist stability rather than a cyclical upswing.

 

The brokerage said SAIL is expected to deliver a short-term return of around 20 - 25 per cent. The firm noted that near-term factors such as protectionist policies and a partial recovery in global steel demand - especially from Europe - could lead to a moderate increase in steel prices, which in turn may drive a 20–25 per cent upside in SAIL’s stock.

Fully integrated iron ore remains a big advantage

Steel Authority's biggest competitive advantage remains its fully integrated raw material base, unlike private steelmakers such as Tata Steel or Jindal Steel and Power (JSPL), which will be affected by the mandatory auction of captive mines under the MMDR Act, 2015. The company's public sector undertaking (PSU) status allows it to retain legacy iron ore mines beyond FY30. 

 

According to Incred Equities, this ensures long-term security of supply and a sustained cost advantage, especially as iron ore and coking-coal prices remain volatile globally. "With volumes improving, a higher share of finished steel, and staff costs rising only moderately, we expect the operating leverage to drive earnings recovery even without major price gains," the brokerage said.

Strong balance sheet supports positive outlook

The brokerage projects the company’s Ebitda per tonne to stay steady in the range of ₹7,000–8,000 during FY24–26F, with earnings per share (EPS) expected to grow at around 8 per cent annually. It also noted that the stock’s valuation, around 1x P/BV, is in line with its long-term average and remains below peak-cycle levels.

 

InCred Equities highlighted that SAIL’s strong balance sheet, reducing leverage, and policy support offer limited downside risk while presenting a clear short-term upside. Reflecting this view, the brokerage maintains a positive outlook, valuing the stock at 1x FY27F book value of ₹158 (up from ₹77 earlier), and upgrades its rating to 'Add' from 'Reduce', citing a defensive yet opportunistic risk-reward profile.

 

The key downside risk, they cautioned, would be a global slowdown that could lead to a decline in steel prices, potentially affecting the target price.