SAIL - Steel Authority of India Ltd. Share Price

In the Q3 FY26 earnings call of Steel Authority of India Limited, management provided an optimistic outlook, highlighting positive trends in both the macroeconomic environment and the steel industry. Global GDP growth is projected at 3.3% in 2026, with India's GDP forecasts upgraded to 7.3%. The Indian steel industry is witnessing robust demand, with steel consumption up 7% and crude steel production up 9.5% year-over-year.

For the company's performance in the nine months of FY25-26, crude steel production increased by 2% to 14.35 million tonnes, while saleable steel rose by approximately 4%-5%. Sales volume surged by 16.3%, enabling significant inventory reduction and a decrease in borrowings of nearly Rs. 5,000 crores. Revenue improved by 9% to Rs. 79,997 crores, with PAT escalating by 60% compared to the previous year, attributed to operational efficiencies and cost optimizations.

Looking ahead, management expects Quarter 4 to witness improved pricing dynamics, projecting continued growth in both production and margins, despite higher coal prices. Specific guidance includes a target of around 22.5 million tonnes of hot metal in FY27. Additionally, the company plans a CAPEX of Rs. 15,000 crores for FY26-27, primarily for the IISCO expansion, which is crucial for further enhancing profitability.

Other key points mentioned include a potential increase in sales price by Rs. 2,000 to Rs. 2,500 for long products and Rs. 3,300 to Rs. 3,500 for flat products in January. The management is optimistic about maintaining margins despite rising production costs and aims for further reduction in net debt in upcoming quarters. Overall, the sentiment indicates strong momentum heading into FY26.

Earnings Call Q&A Summary

Q1: Amit Lahoti from Emkay: "In Q1 FY26, we took a Rs. 1,000 crore inventory write-off due to falling coking coal prices. Was there any gain in Q3? How much could it be in Q4 at current prices?"

A1: I can confirm that in Q3, we had a positive impact of around Rs. 100 crores. For Q4, while we expect an upward positive impact on profitability and margins, we cannot provide an exact figure at this moment due to rising coal prices. However, estimates could suggest increases of 200-400 crores, but it's uncertain.

Q2: Amit Lahoti on expansion plans: "How much will our cost disadvantage narrow with incremental volumes from the IISCO expansion?"

A2: The IISCO project, estimated at Rs. 36,000 crores, is on track for completion in three years. After it's operational, we anticipate a significant boost in both production volumes and margins, enhancing profitability. Borrowing levels have been reduced to accommodate this expansion.

Q3: Pinakin Parekh from HSBC: "Can you quantify the price increases taken in December and January?"

A3: The market improved from mid-December. In January, we reflected a price increase of approximately Rs. 2,000-2,500 for long products and Rs. 3,300-3,500 for flat products, which will also influence February prices positively, coupled with rising coal costs.

Q4: Pinakin Parekh on coal costs in Q4: "What increase in coking coal costs do you anticipate in the 4th Quarter?"

A4: In January, the average imported coal price was Rs. 18,500, projected to rise to Rs. 19,700 in February, with another increase expected in March. Although prices are surging, I don't foresee them increasing beyond $251, given stabilization scenarios.

Q5: Vikas Singh from ICICI Securities: "What was the reason behind the reduction in employee costs on a sequential basis, and what's the outlook?"

A5: The reduction is due to adjustments from actuarial valuations related to gratuity components and discount rates. The wage rates remained stable at 11.5%. Since a wage revision cycle starts in January 2027, most impacts will be felt in FY27-28.

Q6: Vikas Singh on product mix: "Is there scope to reduce semi-finished products next year?"

A6: We're aiming to lower semis to around 10% of production through increased finished product output. We have ambitious plans including a 1-million-ton TMT bar mill at the Durgapur Steel Plant, expected to operational in about 18 months, facilitating further reductions in semi-products.

Q7: Pallav Agarwal from Antique Stock Broking: "Why was there a negative impact on the EBITDA bridge from volume increase?"

A7: The decline in saleable steel production, despite high hot metal output, led to the negative impact in EBITDA. Previous quarter excess inventory management affected this; however, we achieved significant sales growth overall, despite this concern.

Q8: Rashi Chopra from Citigroup: "What was the realization change sequentially from 2Q to 3Q?"

A8: In Q2, the average NSR was 48,836, dropping to 47,735 in Q3. Long product prices increased slightly while flat product prices fell. This slight decrease in NSR averages overall can be attributed to the market conditions and inventory management.

Q9: Sumangal Nevatia from Kotak Securities: "Can you provide a breakdown of FY26 and FY27 CAPEX guidance?"

A9: For FY26, the guidance is between Rs. 7,500 crores to Rs. 10,000 crores, while for FY27 it's Rs. 15,000 crores. Significant expenditures will go towards the IISCO expansion and other modernization projects.

These insights clarify key topics discussed during the earnings call, summarizing management's responses and guidance for the upcoming quarters.