In 4QFY22, Steel Authority of India (SAIL) reported flat revenue (up 32 percent YoY), owing to a better combination of higher ASP and sales volume. Because higher-cost coal will be consumed in 1QFY23, reported EBITDA was higher than expected.
“Recently, the government announced various measures to cool down prices. This resulted in an 11% correction in the stock. It has corrected by ~50% from its 52-week high on fears of waning demand, input cost inflation, and the recent imposition of export curbs. However, the underlying demand cannot be deferred forever. The CMP factors most of the risks, if not all,” said brokerage Motilal Oswal in a note.
SAIL’s profitability is expected to improve when coal prices begin to drop, according to the firm. The metal stock’s Buy rating has been maintained, with a target price of $90 per share. Although there may be some short-term suffering, the risk-reward ratio is now in its favour, as the majority of the downsides have been factored in.
“SAIL’s financial performance is extremely sensitive to coking coal costs due to a higher percentage of coal cost in its RM mix as compared to its peers. We expect its 1QFY23 result to be adversely impacted by higher coking coal cost,” the note stated.
For the fourth quarter ended March 2022. The steel giant recorded a 28 percent drop in consolidated net profit to 2,478.8 crore, owing to rising expenses. The company’s overall income increased to 31,175 crore in the quarter under review.
SAIL’s stock has dropped 10% in the last five trading sessions. The stock has dropped more than 40% in the last year. And is currently down more than 33% in 2022 (YTD).
