“When steel bottoms, the sails are above the 0.6x average, but they are forecasting to spin risk by selling RS 130/share from share from share from share in share from share from share from share from share from sail, which is much lower than the 1.24x in May.
The stock’s target price means a 19% upside chance from its closing price on Tuesday.
Securities firms believe that sails are highly sensitive to steel prices. Every time the price of a hot roll coil (HRC) increases by 1,000 rupees/t, Sail’s EBITDA increases by 15% (4% of Tata Steel) and EBITDA increases by 10% for every $10/t of the coking coal price.
“The softness of the coking coal price reduces the FY27’s caulking coal price assumption by 4% ($9/t).
Commenting on Sail’s expansion and profitability, the report states that Sail plans to significantly expand, increasing its steel production capacity from 20 million tonnes (MT) to 35 MT in multiple phases, increasing its total capital expenditure (CAPEX) of 1.1-1.2 Rs, with FY31 added in the first phase. The second phase, which includes expansions in Rourkela and Durgapur, is still waiting for approval, adding an additional 7.5 MT.Also Read: What’s Behind Fiasco at Indusind Bank?
However, concerns about high debt levels and past delays remain as sailing vessels previously faced significant delays and cost overruns in expanding their salt capacity from 14.6 MT to 25 mt.
Additionally, the next round of CAPEX will start at H2FY26/FY27 and start at the peak of FY28/29, keeping investors careful. In the short term, iron price spreads play an important role in determining sail inventory movement.
Despite these concerns, Axis Securities believes that the recent multiples of valuation will provide a greater advantage in the risk-response balance of inventory.
Finally, Sail’s total borrowing fell to Rs 32,600, falling from 35,596 crores at the end of Q2FY25 in the quarter (QOQ). The company is aiming to reduce its debt to an additional 30,500 crores, consistent with the level seen at the end of FY24.
However, there is a risk that leverage will increase as the company enters the next phase of expansion from FY27 onwards. Sail has set a 1:1 debt versus fair target during this expansion, but there are concerns about execution risks that could affect financial stability, such as potential delays and cost overruns.
(Disclaimer: The recommendations, suggestions, opinions and opinions given by experts are their own. (These do not represent views of the economic era)
