 "SAIL")
Shares of Steel Authority of India (SAIL) hit a fresh 52-week high of Rs 53.60, up 4 per cent on the BSE on Thursday, gaining 55 per cent in the past one month, on expectation of strong demand outlook. In comparison, the S&P BSE Sensex has gained 11 per cent during the same period.
For July-September quarter (Q2FY21), SAIL had reported a consolidated net profit of Rs 437 crore on back of strong operational performance. The state-owned company had posted a net loss of Rs 286 crore in the same quarter of previous fiscal and a loss of Rs 1,226 crore in June quarter (Q1FY21). The company's consolidated revenue from operations grew 20 per cent to Rs 16,925 crore from Rs 14,128 crore in the year-ago quarter.
The Covid-19 pandemic outbreak and measures to curtail it has caused significant disturbances and slow down of economic activities. Consequently, the company's manufacturing operations had to be scaled down during Q1FY21. Following the resumption of operations during the later part of the first quarter, the company has operated at normal capacity in Q2FY21.
With the strategic focus on enhancing the saleable steel production, the company registered the best ever saleable steel Q2 production of 3.752 MT in Q2FY21 surpassing the previous best of 3.658 MT achieved during Q2FY18. The management said the company is determined to perform better in future and is geared up to take all necessary actions to remain a world-class domestic steel producer towards building an Atmanirbhar Bharat.
Motilal Oswal Financial Services expects better volumes and pricing to drive a 29 per cent CAGR in EBITDA (earnings before interest, taxes, depreciation, and amortization) over FY20–22E. Net debt, however, is expected to remain elevated at Rs 45,800 crore in FY22, implying 4.8x net debt/EBITDA, it said.
"Indian steel spreads have risen around 25 per cent in October-December quarter (Q3FY21) and are at a three-year high. We expect spreads to stay strong on the back of a domestic demand recovery and higher regional prices. The improvement in EBITDA/t should be even higher on an improving sales mix (lower exports and higher value-added sales)," the brokerage firm said in steel sector report. However, it rated SAIL 'Neutral' as despite strong near term cash flows, leverage remains high making it vulnerable to any down cycle in margins.
