The shares of government-owned steel producer Steel Authority of India Ltd. (SAIL) have declined 38% to date since early April. As of 12:45 IST, the stock was trading at ₹ 68.45, down 38% since the April 6 closing price of ₹ 110.50 per share.
Billionaire investor Rakesh Jhunjhunwala, who earlier held a 1.8% stake in the company has reportedly trimmed his stake below 1% as per the shareholding pattern of the company. In an interview, Rakesh Jhunjhunwala mentioned that he was bullish on the steel sector.
The shares of metal companies have been under stress from slowdown and discontinuous lockdowns in China, the world’s largest metal consumer. Interest rate hikes announced by the central banks across various countries to curb inflation and anticipated economic slowdown are also reasons which have contributed to decreased demand for the metal stocks.
The government’s decision to increase export duty on all grades of iron ore, pellets and non-alloy steel products came as a surprise to the industry.
The net profit for the March quarter ended 2022 increased 62% to ₹ 2,478 crores from ₹ 1,528 crores reported for the December quarter ended 2021. On a year-on-year basis, it declined 28.5%. This was primarily because of a spike in expenses to the tune of 48.7% to ₹ 28,005 for Q4FY22 from ₹ 18,829 for Q4FY21.
Analysts at Edelweiss expect SAIL’s debt to increase again despite its significant reduction in FY22 as the management has guided a capital expenditure of ₹ 8,000 crores. Further, increasing coking coal costs are expected to dent operating margins.
Analysts at Centrum Broking have given a price target of ₹ 132 per share for the large-cap company, signalling an impressive upside of 93% over the next 12 months.
Written by Vikalp Mishra
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