Target: ₹200
CMP: ₹160.25
We expect sharp earnings recovery for SAIL. We see near-term catalysts of self-help and pricing tailwinds supporting a recovery in SAIL’s earnings trajectory, with EBITDA/t expected to improve to ₹7,000–7,500 over the next two quarters vs ₹4,500 in Q3.
We see three distinct favourable catalysts: Inventories: We expect continued inventory unwind, with potential of another 1.5 mt over coming quarters. With this, SAIL is likely to deliver Q4 volume of 5.4 mt (+5.5 per cent q-o-q); Prices: Rebar prices have recovered meaningfully with uptick in construction and infra project activity, which, despite the recent spike in coking coal costs (QTD average of $235/t vs $199/t in Q3), should support a sequential recovery in margins; and Deleveraging: Higher realisations coupled with inventory unwind are likely to strengthen cash flow generation, reducing net debt by 28 per cent y-o-y to ₹20,800 crore in FY26.
We see a set of structural catalysts strengthening the investment case, which should enable it to sustainably generate EBITDA/t of ₹7,500-8,000, building in a steel–coking coal spread of $350/t.
We maintain Buy on SAIL and increase our TP to ₹200 from ₹175, as valuations remain compelling, supported by near-term self-help measures and pricing tailwinds. Inventory unwind, improving product mix, and coal blending efficiencies should drive margin stability, while stronger domestic prices aid near-term profitability. SAIL trades at 1.1x P/B vs its long-term average of 0.7x and sector P/B of 2.8x (long-term average: 1.6x).