Steel Authority of India: Analysts See Sharp Earnings Potential

Steel Authority of India Shares in Focus as Emkay Global Reaffirms Buy, Raises Target to ₹200​

Shares of Steel Authority of India Ltd are expected to remain in focus on Wednesday, February 25, after brokerage firm Emkay Global reiterated its Buy rating and raised the stock’s price target by 14 percent to ₹200 from ₹175 earlier.

The revised outlook is anchored in attractive valuations, improving operational levers, and supportive domestic steel pricing trends that are expected to drive near-term profitability.

Valuation Comfort and Margin Stabilisation in Focus​

According to the brokerage, the stock is currently trading at 1.1 times price to book, compared with its long-term average of 0.7 times. This remains below the sector average of 2.8 times, whose long-term mean stands at 1.6 times.

Emkay highlighted that ongoing inventory liquidation, a gradual improvement in product mix, and gains from coal blending efficiencies are likely to stabilise margins. Firmer domestic steel prices are also expected to support profitability over the near term.

The brokerage noted that continued inventory normalisation is aiding volume growth, while rebar prices have rebounded meaningfully. Improving cash flows are expected to help keep net debt under control.

Earnings Recovery Expected Over Next Two Quarters​

Emkay projects a sharp earnings recovery, with EBITDA per tonne expected to rise to ₹7,000 to ₹7,500 over the next two quarters. This compares with ₹4,500 per tonne reported in the December quarter.

The improvement is likely to be driven by inventory unwind and better realisations. Quarter to date averages are up 11 percent for flat products and 17 percent for long products compared with Q3 levels.

However, the brokerage flagged that this may be partly offset by an 18 percent quarter on quarter increase in coking coal costs.

Medium to Long-Term Growth Roadmap​

From a structural standpoint, SAIL plans to reduce the share of semi-finished products over the next two years to enhance its product mix.

The company also expects to improve coking coal consumption efficiency to 0.9 times of crude steel by FY30, compared with 1 times currently.

In addition, SAIL has outlined a 4 million tonne expansion at its IISCO plant, which will increase total capacity to 25.6 million tonnes by FY30. The expansion entails a capital expenditure of ₹36,000 crore.

Over the medium term, Emkay believes that a better product mix, including the Durgapur mill by FY28, improved coal blending, and the 4 million tonne IISCO expansion will help sustain EBITDA of ₹7,500 to ₹8,000 per tonne at a 350 dollar per tonne steel coking coal spread.

Stock Performance​

SAIL shares closed 2.16 percent higher at ₹160.07 on Tuesday. The stock has rallied more than 30 percent over the past six months, reflecting improving sentiment around operational recovery and pricing support.