SAIL Shares Complete Fundamental Analysis and Future Outlook
Steel Authority of India (SAIL) is the largest steel producer in the country. It is a Government of India undertaking and has 5 integrated steel plants, 3 speciality plants and 1 subsidiary.
- The company’s shares have 52 weeks high of INR 60.2 and have a total market capitalization of INR 99.34 billion which makes it a Large-Cap company.
- With the increased expenditure on infrastructure projects by the government, SAIL stands to benefit in the long run as it is the largest producer in India.
- The company has a good foothold in the industry as it has the scale as well as the backing of the Government. This helps them to penetrate deeper into government initiatives and infra projects as compared to other private companies.
- The steel products are not highly differentiated and the market dominance is achieved by low-cost structure and high volume sales. Also, the industry is asset-heavy so there is a high barrier to new entrants.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: SAIL Shares Complete Fundamental Analysis
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- The lockdown due to COVID-19 will affect the production and the FY 2020 revenue. The global supply of steel will also be disrupted. However long term infrastructure projects, from where SAIL gets a major chunk of its revenue will see revival once the situation clears.
- Steel demand has improved since November 2019 and if there is progress on infrastructure projects, FY 2021 demand is also expected to be good.
- Price hikes done by SAIL in FY 2020 are as follows: Steel Flats — INR1,600 per tonne in January and INR1,500 per tonne in February. For Steel Longs, it was INR 2,000 per tonne in January and again INR 2,000 per tonne in February. The steel price may further see an increase next year.
- The company has plans for cost reduction and improving profitability. This includes high volume to improve fixed cost reductions, reduced variable costs, reduce manpower costs through voluntary retirement schemes etc.
Overall the company can see increased sales and profitability in the coming years and this will make the shares trade at higher valuation multiples. This also depends upon the economic conditions and government fiscal policy after the COVID-19 situation clears.
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