31 January 2021
3QFY21 Results Update | Sector: Metals
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
237.9 / 3.2
80 / 20
TP: INR81 (+41%)
Upgrade to Buy
Biggest beneficiary of improved pricing
Strong deleveraging to add to equity value; upgrade to Buy
Financials & Valuations (INR b)
2021E 2022E 2023E
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
FCF Yield (%)
681.8 734.7 764.1
128.8 118.1 106.0
SAIL’s result highlights strong gains from higher steel prices in the business
model – 3QFY21 EBITDA was up 147% YoY to INR50.8b, the highest ever.
Net debt also fell sharply by 12% QoQ to INR443.0b.
Spot steel prices are ~INR7,000/t, above the 3QFY21 average, which should
drive 24% QoQ growth in EBITDA in 4QFY21, even after factoring in wage
revisions. We raise FY21E EBITDA by 13%, factoring in strong near-term
Even after factoring in conservative pricing in FY22E (~INR10,000/t decline
from spot), we estimate a further INR71b (INR17/sh) fall in net debt to
INR372b (3.2x of EBITDA) by Mar’22. Therefore, we upgrade to
valuation is also attractive at 5.2x FY22e EV/EBITDA and 0.5x P/B.
Strong realization drives beat on EBITDA
109.1 118.9 126.4
Shareholding pattern (%)
Dec-20 Sep-20 Dec-19
Sales / EBITDA / adj. PAT at INR198b/50.8b/25.7b came in at
+17%/+167%/+929% QoQ and -3%/+14%/+29% v/s our estimate.
Sales volume was weaker at 4.15mt (est. 4.4mt) due to lower exports.
Blended realization surprised positively, rising by INR7,576/t QoQ to
INR47,813/t (est. INR46,237/t). This was owing to higher steel prices and
contribution from iron ore sales (benefit of ~INR790/t). As a result,
EBITDA/t also rose by INR7,722/t QoQ to INR12,241/t (22% above
Finance cost fell 21% YoY to INR6.7b on lower debt and interest rate.
In this quarter, SAIL has also moved to the new tax regime and has written
off deferred tax assets of INR12.9b. While reported PAT was INR12.8b,
adjusted PAT was thus higher at INR25.7b (10x of 2QFY21).
Interim dividend of INR1.0/sh (INR4.1b outflow) was also announced.
9MFY21 revenue/EBITDA stood at INR458b/INR65.7b, +1%/+76% YoY on
higher EBITDA/t of INR6,208/t (+74% YoY). Adj PAT stood at INR15.5b v/s
loss of INR7.0b in 9MFY20.
FII Includes depository receipts
Conference call takeaways – NSR at INR7,000/t, above 3QFY21 average
While primary rebar prices are expected to correct due to increased supply
from secondary steel mills at lower prices, flat product (HRC) prices are
expected to remain strong. Jan’21 NSR was ~INR7,000/t, above 3QFY21.
Revisions in employee wages would be done retrospectively from Apr’20,
and provisions for the same would be made in 4QFY21. The impact of the
wage revisions has been guided at >10% of employee cost (INR87.1b in
Debt reduced by a further INR14b in Jan’21, and net debt is guided to fall
below INR400b by Mar’21.
Amit Murarka - Research analyst
Basant Joshi - Research analyst
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.