SAIL - The Best Play On Higher Steel Prices: Motilal Oswal
Ingots sit stacked at the Steel Authority of India Ltd. (SAIL) Rourkela Steel Plant in Rourkela district, Odisha, India. (Photographer Dhiraj Singh/Bloomberg).

SAIL - The Best Play On Higher Steel Prices: Motilal Oswal

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

We see Steel Authority of India Ltd. as the best play on higher steel prices as it -

  1. is backward integrated with captive iron ore,
  2. has higher operating leverage due to high conversion cost, and
  3. has higher financial leverage.

With limited capex, higher pricing should drive significant deleveraging and boost equity value.

We estimate net debt to decline by Rs 232 billion (Rs 56 per share, 76% of the current market price) over FY20-23E to Rs 305 billion.

We also expect higher dividend payouts going forward (implying approximately 5% yield), supported by a strong free cash flow of Rs 19 per share (25% yield).

Click on the attachment to read the full report:

Motilal Oswal SAIL Company Update.pdf

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