SAIL - Double Dhamaka

By Research Desk
about 1 month ago

We refer to our artcle carried here on 3rd Feb, 18th Jan and 22nd Dec, wherein fundamentals and strength of SAIL were discussed. Share was ruling at Rs. 55 on 22-12-20 and now at Rs. 73, giving a gain of 33% in about 3 months. SAIL is one of the largest steel making company in India, with a capacity of over 15 MTPA, with five integrated plants at Bhilai, Bokaro, Rourkela, Durgapur and IISCO, making Long & Flat products, as also, Special Steel, with none of Indian Steel maker matching to its product range and profiles. SAIL is capable of posting an EPS of Rs. 24 for FY22, while it may be seen at Rs. 7.50 for FY21.  

Ferrous Metal makers have recently finalised LT Contracts with Auto OEM, wherein, a minimum increase of Rs. 5,000 per MT has taken, while this higher realisation will get reflcted largely in FY22.  Apart from this, PSU stocks are being lapped up by the market, post PM Modi Ji hinted of privatisation of more PSUs, as having said that “Govt has no businss to be in business”. If SAIL is put on the block in FY 22 by Govt, as this sector and company has been held as Non Strategic by Niti Aayog, major Global Steel makers will be vying to acquire it. Mittals, Tatas, Jindals, Vedanta will be keen from India as well.

Bhilai & Bokaro plants of SAIL use process of Acid washing of Benzol, which is a chemical waste, is also seeing its realisations having risen by 60% in last 2 -3 months, which will ramp up margins as well, to see SAIL otherwise reporting exempalary and bumper Q4FY21 numbers. So is the recent fall in share price is Lull before the Storm?  .

M cap of Rs. 30k cr and net debt of Rs. 30k cr, gives an EV of Rs. 4,000 cr per MT, with BV of Rs.100 per share. Steel plants have been acquired at a valuation of Rs. 7,500 cr per MT in NCLT process, about 12-18 months back. In last 18 months, valuations of sector got raised further by 30%.    
This is not a Buy recommendation and stock recommendations are provided exclusively to our paid members in the Member Zone.

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