Recommendation from Metals & Mining Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.[EasyDNNnews:PaidContentStart]

Steel Authority of India Ltd. (SAIL) : TRANSFORMING STEEL FOR A SUSTAINABLE FUTURE

HERE IS WHY
✓  Strong Domestic Demand Drivers
✓  Strategic Expansion Plans
✓  Sustainability Focus

The global steel industry has faced challenges over the past year, including geopolitical tensions, oversupply from China, and sluggish demand in major markets such as Europe. However, the Indian steel industry, led by Steel Authority of India Ltd. (SAIL), has shown resilience. SAIL has capitalised on the robust domestic infrastructure push and the expansion of the private sector. India’s steel industry is expected to grow by 8-9 per cent in FY 2025–26, which is significantly higher than global projections of 1.5-2 per cent.

SAIL, established in 1973, is a Maharatna CPSE under the Ministry of Steel, Government of India. Headquartered in New Delhi, it operates across the entire steel value chain, from mining and raw material sourcing to steel production and distribution. SAIL is also integrating renewable energy into its operations, with a goal of reaching 384 MW of renewable energy capacity by FY28. These initiatives are not only aligned with India’s Net Zero targets but also cater to the increasing global demand for environmentally sustainable steel production.

SAIL’s growth is also fuelled by the strong demand for steel in India, supported by the government’s infrastructure and housing projects. As India’s steel consumption continues to grow, driven by developments in infrastructure, housing, and automotive sectors, SAIL is well-positioned to meet this demand. Additionally, the company’s focus on operational efficiency—improving productivity and reducing costs—has led to consistent growth in production. Its expansion plans include the introduction of high-strength steel products designed for sectors such as automotive, energy, and Defence, which will further drive sales and market share.

Moreover, SAIL has made significant progress in reducing its debt, which has enhanced its financial stability and provides flexibility for further strategic investments. The company’s strong relationships with industry players and its participation in government-backed initiatives like the PLI scheme for specialty steel ensure its continued market dominance and ability to compete in both domestic and international markets.

In FY 2025, SAIL reported a revenue of Rs 1,02,478 crore, a 2.75 per cent decrease YoY, due to a reduction in Net Sales Realisation (NSR), which impacted profitability. EBITDA for the year stood at Rs 11,764 crore, a 4.2 per cent decline, while PAT decreased by 21.3 per cent to Rs 2,148 crore, primarily due to higher costs and depreciation. For Q2 FY 2026, SAIL saw a marginal 3.55 per cent QoQ increase in revenue to Rs 27,007 crore, with an 8.27 per cent YoY growth. However, EBITDA fell by 10.88 per cent YoY to Rs 2,829 crore, and PAT dropped by 48.8 per cent YoY to Rs 427 crore, mainly due to lower NSR, exceptional items, and production issues.

At the current price of Rs 144, SAIL trades at a P/E of 21.4x, slightly below the industry average, and above its five-year median P/E of 13.6x. Given the cyclical nature of the steel sector, this higher P/E could fall as steel prices recover resulting in improved earnings. With an EV/EBITDA ratio of 7.62x and a manageable debt-to-equity ratio of 0.58x, SAIL also offers a solid dividend yield of 1.11 per cent.

Given the robust infrastructure demand, SAIL’s operational excellence, strategic investments, and sustainability initiatives, we recommend a BUY on Steel Authority of India Ltd. The stock offers an attractive entry point for investors looking to capitalize on India’s steel demand growth and SAIL’s transformation into a higher-value producer. With continued volume growth and strategic expansions, SAIL is poised for long-term success.

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