12 June 2021
4QFY21 Results Update | Sector: Metals
SAIL
Estimate change
TP change
Rating change
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CMP: INR135
TP: INR185 (+37%)
Buy
Biggest beneficiary of improved pricing
Deleveraging to remain strong
Bl oomberg
Equi ty Sha res (m)
M.Ca p.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel . Per (%)
12M Avg Va l (INR M)
Free fl oa t (%)
SAIL IN
4,130
557.8 / 7.6
151 / 29
-11/120/294
4297
35.0
SAIL continues to reap the benefits of higher steel prices as 4QFY21 EBITDA
grew 21% QoQ, despite a wage revision impact. In the absence of
significant capex, net debt declined further to INR366b (v/s INR538b in
Mar’20).
With steel prices at a record high, SAIL is poised to post its best ever
EBITDA/t of ~INR20,000 in 1QFY22. We upgrade our FY22E/FY23E EBITDA
estimate by 71%/33% to factor in higher steel prices, and estimate a further
INR102b (INR25/share) fall in net debt to INR265b (1x EBITDA) in FY22E.
We expect dividend payout to be strong at INR10/share in FY22E (7.5%
yield), based on an expected 25% payout ratio. Reiterate
Buy.
Sales/EBITDA/adjusted PAT rose 17%/21%/39% QoQ in 4QFY21 to
INR232.9b/61.5b/35.7b and was 1%/9%/11% below our estimate.
Blended realization grew only INR5718/t QoQ (v/s 8-10k/t for peers) to
INR53,531/t (est. INR55,273/t), due to weaker mix and sales to railways
(~10% of volumes) made at lower provisional prices.
Employee cost was higher at INR40.7b (est. INR36.3b) v/s INR23.4b in 3Q
due to an INR11.6b provision for wage revision in FY21. As a result,
EBITDA/t stood at INR14,145/t (+16% QoQ) on a reported basis and at
INR16,802/t (+37% QoQ) adjusted for a wage revision provision.
Sales volume stood at 4.35mt, up 5% QoQ/16% YoY.
Finance cost fell 19% QoQ to INR5.4b due to debt repayments.
Consolidated revenue/EBITDA stood at INR691.1b/INR127.4b in FY21, up
12%/123% YoY on higher EBITDA/t of INR8,526/t (+112% YoY). Adjusted
PAT stood at INR54.5b v/s a loss of INR1.9b in FY20.
Higher FCF leads to net-debt reduction:
Led by strong OCF at INR234b
(higher EBITDA and working capital release of INR100.6b) and lower capex
at INR35.3b (-20% YoY), FCF rose to INR199b (v/s INR49.9b in FY20). This
helped lower net debt by INR167b YoY (INR76.8b QoQ) to INR366b in
Mar’21. Net debt/EBITDA ratio declined to 2.9x, the lowest since FY12.
Volume guidance:
Despite a production loss in Apr-May’21, SAIL has guided
at steel/iron ore sales of 18.3mt/13.5mt in FY22 (v/s 14.9mt/3.2mt in
FY21). We have factored in sales of 16.6mt in FY22.
Pricing remains strong in Jun’21:
Steel realization remains strong in Jun’21,
with flats/longs NSR in Jun’21 being higher by ~INR10,000/INR5,500 per
tonne over Mar’21 at INR63,500/INR50,500 per tonne.
EBITDA up 21% QoQ despite a wage revision hit
Financials & Valuations (INR b)
Y/E MARCH
2021 2022E 2023E
Sa l es
EBITDA
Adj. PAT
EBITDA Ma rgin (%)
Cons . Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
Net D:E
RoE (%)
RoCE (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA(x)
FCF Yi eld (%)
10.3
1.2
7.3
0.1
3.5
1.0
3.0
0.2
5.3
0.9
3.9
0.2
691.1 919.0 867.5
127.4 269.8 193.3
54.1 159.1 105.7
18.4
13.1
29.4
38.5
22.3
25.6
na 194.3
-33.5
109.9 138.0 153.1
0.8
12.4
10.7
0.5
31.1
26.1
0.3
17.6
16.4
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
65.0
16.7
4.3
14.0
75.0
13.0
4.2
7.9
75.0
14.6
2.9
7.5
Conference call takeaways – Profitability to improve on higher NSR
FII Includes depository receipts
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com)
Research analyst - Basant Joshi
(Basant.Joshi@motilaloswal.com);
Jayant Gautam
(Jayant.Gautam@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.