Reiterate ‘buy’ on SAIL; expect volumes to post 9% CAGR

By: |
April 06, 2021 8:12 AM

SAIL, in a press release, informed that it has reduced its gross debt by Rs 161 billion (30%) in FY21 to Rs 353 billion (excluding lease liabilities).

SAILSAIL recorded its highest ever quarterly volumes of 4.27 mt (provisional) in 4QFY21 (+14% YoY; +3% QoQ).

SAIL, in a press release, informed that it has reduced its gross debt by Rs 161 billion (30%) in FY21 to Rs 353 billion (excluding lease liabilities). We estimate SAIL’s 4QFY21-end gross debt at Rs 380 billion, including lease liabilities. In 4QFY21, the company has reduced its gross debt by Rs 86.3 billion (23% QoQ).

SAIL recorded its highest ever quarterly volumes of 4.27 mt (provisional) in 4QFY21 (+14% YoY; +3% QoQ). As a result, it also achieved its highest ever annual sales of 14.87 mt in FY21 (+4% YoY). Crude steel production rose 6% YoY / 4% QoQ to 4.55 mt. Crude steel production stood at 15.21 mt (down 6% YoY) due to Covid-led lockdowns.
We expect SAIL’s volumes to post a 9% CAGR to 17.5 mt over FY21–23E, driven by improved demand and rising capacity utilisation. We estimate SAIL’s net debt to decline by Rs 233 billion (Rs 56/share) to Rs 305 billion (Rs 74/share) over FY20–23E – on the back of a 36% EBITDA CAGR to Rs 145 billion over FY20–22E. At CMP, the stock is trading at 4.5x FY22E EV/EBITDA and 0.5x P/B. We value the stock at 5x FY22E EV/EBITDA at Rs 104/share, implying target P/B of 0.8x (historical average of 0.7x). Reiterate ‘buy’.

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