Accumulate Steel Authority of India; target of Rs 66: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Steel Authority of India with a target price of Rs 66 in its research report dated February 01, 2021.

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Prabhudas Lilladher’s research report on Steel Authority of India

Strong steel margins and advantage of selling iron ore fines in open market helped SAIL to reduced debt by 16% in Apr’20-Jan’21. We expect margins to further improve by 17%/Rs5,200/t in Q4FY21e due to higher steel prices, muted input costs and higher iron ore sales. However, we expect margins to weaken Q1FY22E onwards due to strong revival in supplies, softening of demand (due to high prices) and increase in coking coal prices.

Outlook

Driven by better shaped B/S and attractive valuations (post fall of ~24% in last one month), we upgrade stock to Accumulate with TP of Rs66 based on EV/EBITDA of 5x FY22e.

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