SAIL Q4 Profit Surges; Citi, Morgan Stanley Cautious While Investec Bullish
Steel Authority of India posted strong Q4 results with net profit of 18.35B rupees, EBITDA of 44B rupees, and margin expansion to 14.31%. Post results, Citi maintained Sell at ₹180 citing cost risks, Morgan Stanley retained Underweight at ₹140 on volume concerns, while Investec held Buy at ₹270 citing a 19% EBITDA beat and 16% volume growth guidance to 22MT.
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Steel Authority of India delivered a strong financial performance in the fourth quarter, with consolidated net profit rising to 18.35B rupees compared to 12.5B rupees in the year-ago period, comfortably exceeding the market estimate of 11.12B rupees. Revenue also saw healthy growth, climbing to 308B rupees from 293B rupees year-on-year, reflecting improved operational momentum across the business.
EBITDA and Margin Performance
The company's operating profitability showed a marked improvement during the quarter. EBITDA surged to 44B rupees from 34.8B rupees in the corresponding period of the previous year, underscoring stronger cost efficiency and revenue realization. The EBITDA margin expanded meaningfully to 14.31% from 11.9% year-on-year, indicating improved operational leverage.
The following table summarizes the key financial metrics for the quarter:
| Metric: | Q4 Current | Q4 Previous Year | Change |
|---|---|---|---|
| Consolidated Net Profit: | 18.35B Rupees | 12.5B Rupees | YoY Increase |
| Revenue: | 308B Rupees | 293B Rupees | YoY Increase |
| EBITDA: | 44B Rupees | 34.8B Rupees | YoY Increase |
| EBITDA Margin: | 14.31% | 11.9% | YoY Expansion |
| Net Profit Estimate: | 11.12B Rupees | — | Beat |
Analyst Ratings and Target Prices
Following the quarterly results, major brokerages have issued divergent views on the stock. The table below captures the latest analyst stances:
| Broker: | Rating | Target Price |
|---|---|---|
| Citi: | Sell | ₹180 |
| Morgan Stanley: | Underweight | ₹140 |
| Investec: | Buy | ₹270 |
Citi maintained a Sell rating with a raised target price of ₹180, acknowledging strong Q4 EBITDA growth driven by higher realizations and improved EBITDA per tonne. However, the brokerage flagged rising coking coal costs, wage revision risks, aggressive capital expenditure plans, increasing leverage, and dependence on debottlenecking for volume growth as factors that could limit further upside, despite management's optimistic pricing and volume outlook.
Morgan Stanley retained its Underweight rating with a target price of ₹140, noting that adjusted EBITDA came in below its own estimates, though it was ahead of broader consensus. The brokerage highlighted weaker-than-expected volumes and realizations, partially offset by lower costs. While Morgan Stanley expects margin expansion in Q1FY27 on the back of higher steel prices, it views the company's FY27 volume guidance of 22MT as overly optimistic.
Investec, taking a contrarian stance, maintained a Buy rating with a target price of ₹270. The brokerage cited a strong Q4 operational performance, with EBITDA beating estimates by 19% due to improved spreads. Investec expressed optimism on further spread expansion in Q1FY27 despite Street concerns of peaking pricing, and highlighted management's 16% volume growth guidance to 22MT along with a continued focus on efficiency and growth capex, positioning Steel Authority of India as a strong play on tariff-led steel spread improvement.
Key Financial Highlights
- Net profit of 18.35B rupees significantly exceeded the analyst estimate of 11.12B rupees
- EBITDA grew from 34.8B rupees to 44B rupees year-on-year
- EBITDA margin improved to 14.31% from 11.9% year-on-year
- Revenue increased to 308B rupees from 293B rupees in the year-ago quarter
- Citi maintains Sell with target price of ₹180, citing cost and leverage concerns
- Morgan Stanley maintains Underweight with target price of ₹140, viewing 22MT volume guidance as overly optimistic
- Investec maintains Buy with target price of ₹270, citing 19% EBITDA beat and 16% volume growth guidance
Historical Stock Returns for Steel Authority of India
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +0.17% | +4.25% | +15.44% | +35.73% | +57.07% | +47.63% |
How might rising coking coal prices and upcoming wage revisions impact SAIL's EBITDA margins in FY27, potentially eroding the gains achieved in Q4?
Can SAIL realistically achieve its 22MT volume guidance for FY27 given current debottlenecking constraints, and what milestones should investors watch to assess progress?
How will SAIL's aggressive capital expenditure plans affect its leverage ratios over the next two years, and at what debt level could it become a concern for credit ratings?
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