SAIL’s Share Of High-Margin Products To Rise
Share of high-margin products will increase Steel Authority of India Ltd.’s offerings once the state-run company expands its capacity.
The composition of structural products would inch up to 14 percent from 7 percent in the year ended March after the planned capex is complete, according to its investor presentation. The shift would tilt from hot-rolled coil to cold-rolled coil, which is used in home appliances and infrastructure.
That comes at a time the government’s infrastructure push in an election year is expected to boost demand for steel.
Elara Capital, which has a ‘Buy’ on the steelmaker, had said in April that SAIL’s new cold rolling facility, galvanising, rail and new heavy structural mill “should aid margin expansion”.
Shares of SAIL have returned 43 percent in the last one year compared with a 17 percent rise in the benchmark metal index. Six out of 20 analysts tracked by Bloomberg have a ‘Buy’ rating on the stock, four recommend ‘Hold’, and 10 suggest ‘Sell’.
SAIL, however, missed its 21.4 million tonnes a year capacity target in the last financial year. It ranked No. 2 after JSW Steel Ltd. as Tata Steel Ltd.’s acquisition Bhushan Steel Ltd. was cleared after March 31.
JPMorgan in a May report had cautioned against the company’s ability to deliver on guidance even in the ongoing financial year, stating that it was be a bit aggressive. The issue with SAIL is how much time it takes to ramp up its capacity, it said.
The steelmaker’s capex has been falling as it nears completion and is expected at Rs 4,000 crore in the ongoing financial year. That compares with Rs 5,130 crore in the previous financial year after the company overshot the original Rs 4,700-crore target.