Steel Authority of India: Target Price Set at Rs 209 by Prabhudas Lilladher

Steel Authority of India (SAIL) Reports Strong Operating Performance in Q4FY26

Steel Authority of India (SAIL) delivered a strong operating performance in Q4FY26, driven by a sharp improvement in Net Sales Realization (NSR) amid rising domestic steel prices. The company's reported volumes remained flat year-over-year (YoY) at 5.32 million tonnes (mt) due to lower National Steel Policy (NSL) trading volumes. However, own steel sales volume grew 5% YoY, indicating a positive trend.

The average NSR improved 9% quarter-over-quarter (QoQ) to INR57,898 per tonne as longs pricing improved from early January 2026, while flats followed later. Despite increased coking coal costs, lower employee costs, better operational efficiencies, and inventory liquidation supported Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) per tonne at INR8,279. Management indicated that April-May NSR for longs would be at INR57,600-57,800 per tonne and flats at INR56,000-56,700 per tonne, implying a ~INR4,000 per tonne increase over Q4FY26 levels.

However, imported coking coal costs have also increased sharply from INR18,200 per tonne in Q4FY26 to INR21,000-21,800 per tonne in April-May. Furthermore, management has guided for FY27 sales volumes of 22.5mt (including ~0.6mt from Rashtriya Ispat Nigam Limited (RINL) sales), aided by debottlenecking and operational improvements.

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Risks Ahead

Rising coking coal costs and impending demand destruction in the near term due to higher crude prices remain a risk for SAIL. Despite this, we raise our FY27/28E EBITDA estimates by ~20% on higher steel prices and lower operational expenses.

Valuation and Recommendation

At the current market price, the stock is trading at an Enterprise Value (EV) of 5.4x/5.2x FY27/28E EBITDA. We maintain our 'Accumulate' recommendation with a revised target price of INR209 (INR176 earlier), giving the same 5.5x March 2028 EV/EBITDA multiple.

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