SAIL reportedQ4FY15 Ebitda of Rs 930 crore, down 24% y-o-y and 30% below our estimates. While saleable steel production increased by 5% y-o-y during the quarter, the shipments were down sharply by 9% as the company continues to decrease offtake in order to provide support to realisations. This strategy worked again in this quarter with realisations for SAIL dropping by 6% y-o-y compared to other steel producers’ realisations declining 8-12% y-o-y. The company announced a final dividend of R0.25 per share share, taking the total dividend to R2 per share; in line with dividends paid in the previous year and our estimates.
SAIL’s ongoing expansion target of 20mtpa saleable steel production capacity continues to be a key concern area, especially in these challenging market conditions. Lower offtake in Q4 despite higher production signals lacklustre demand and difficulties in pushing sales on the face of rising imports. Net debt has increased sharply in the last six months by 20% and the debt to equity ratio of 0.7x is at its peak of the last several years. Interest cost of R430 crore was up by 37% y-o-y and we continue to see this rising as SAIL guides for higher expenditure for its expansion projects in FY16e when net steel realisations are under pressure.
We reiterate our ‘reduce’ rating with an unchanged target price of Rs 44 per share.