Motilal Oswal has kept its positive outlook on Steel Authority of India (SAIL) with a target price of ₹195. The update follows adjustments for a ₹310 crore one-time rail price revision that impacted recent quarterly figures. Investors are now tracking the company's ability to drive volume growth as the primary factor for future performance.
Motilal Oswal has reaffirmed its stance on Steel Authority of India Limited (SAIL), setting a target price of ₹195 per share. This valuation is based on an EV/EBITDA multiple of 7.5x, reflecting the firm's projections for the company's fiscal year 2028 earnings. The brokerage report emphasizes that while current operational metrics face short-term challenges, the long-term potential depends largely on successful capacity expansion and volume growth.
Q1 FY27 Performance and Adjustments
For the first quarter of fiscal year 2027, SAIL’s reported financials included a one-time downward adjustment of ₹3.1 billion, or ₹310 crore, attributed to a rail price revision related to the 2025 fiscal year. When adjusting for this specific item, the company's revenue for the quarter stood at ₹266 billion. This figure shows a modest 3% growth compared to the same period last year. However, on a sequential basis, revenue fell by 14%, a trend primarily driven by lower sales volumes during the quarter. Despite the dip in volume, the company saw support from healthy net sales realization, which is the amount earned per unit after deducting freight and other costs.
Strategic Focus on Volume Expansion
The ability of SAIL to improve its financial performance and potentially see a valuation re-rating remains tied to its operational volume. Brokerage analysis suggests that meaningful earnings growth will require the company to scale up its production. This expansion is expected to come from the commissioning of new projects or through strategic third-party agreements. For investors, the company's progress on these capacity-related initiatives is a key area to monitor, as they are expected to serve as the main drivers for future revenue and profit improvements.
Sector Context and Investor Monitorables
The Indian steel sector continues to deal with fluctuating global prices and the need for high capital spending to maintain or grow market share. Because steel manufacturing is capital-intensive, the company’s ability to manage its debt-to-equity ratio while pursuing expansion is a standard consideration for shareholders. Investors tracking the company may watch for management updates regarding project execution timelines, the impact of new capacity on operating margins, and any further developments in price realizations for its products. The final benefit of these efforts will depend on whether domestic and export demand remains strong enough to absorb the planned increases in supply.