Target: ₹130

CMP: ₹126

SAIL reported revenue of ₹25,800 crore (+7 per cent y-o-y and -12 per cent q-o-q) against our estimate of ₹27,600 crore, primarily due to muted volumes in Q1. Adjusted PAT came in at ₹570 crore (vs. our est. ₹1,150 crore), up 76 per cent y-o-y but down 55 per cent q-o-q in Q1-FY26.

SAIL’s Q1-FY26 performance was affected by soft volumes and one-time costs related to inventory revaluation and a rise in royalty on iron ore. We trim our FY26 EBITDA/PAT estimates by 7/13 per cent to incorporate the Q1 performance miss; however, we maintain our FY27 estimates.

SAIL plans to increase its capacity to 35mtpa. This plan is currently in the initial tendering phase and any notable development is expected to be visible after FY27. For FY26, SAIL has set a capex target of ₹7,500 crore, to be spent on ongoing projects across various plants. The IISCO expansion will start contributing to capex from FY27 onward, and similar capacity enhancement plans are being considered for other facilities in the next phase.

Considering the limited room for production, we estimate a modest volume CAGR of 6 per cent over FY26-27. Any incremental earnings will be driven by healthy pricing and lower costs.

We reiterate our Neutral rating on the stock with a TP of ₹130 (premised on 6x EV/EBITDA on FY27E

Published on July 29, 2025