Motilal Oswal has given Buy recommendation for SAIL recommended buy rating on the stock with a target price of Rs 90 in its researc with a target price of Rs. 90 in its research report issued on May 24, 2022

Motilal Oswal’s research report on SAIL

SAIL reported an in line revenue at INR308b (up 32% YoY and 22% QoQ) in 4QFY22, driven by an improved mix of higher ASP and sales volume. Reported EBITDA was greater than our estimate as consumption of higher-cost coal will occur in 1QFY23. Recently, the government announced various measures to cool down prices (refer Exhibit 1). 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. Coking coal has been hovering above USD500 for the last four months, The La-Nina phenomenon in Australia is over. Coking coal supplies from China are improving. We expect coal prices to start correcting, which will support profitability for SAIL.

Outlook

We maintain our Buy rating with a TP of INR90/share, at 5x FY23E EV/EBITDA. There could still be short-term pain, but the risk-reward ratio is now in its favor as most of the negatives are priced in.

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