Strong Q4 Results Driven by Higher Steel Prices

Steel Authority of India (SAIL) reported strong operating results for its fourth quarter of fiscal year 2026. The company's Net Selling Realization (NSR), which reflects the average selling price of steel, increased by 9% from the previous quarter to ₹57,898 per tonne. Own steel sales volume also grew by 5% year-on-year. This pricing strength, combined with improved operational efficiencies and cost management, led to a 5% increase in profit per tonne (EBITDA per tonne) to ₹8,279.

Analyst Optimism Tempered by Rising Coal Costs

Analysts at Prabhudas Lilladher have raised their EBITDA estimates for SAIL for fiscal years 2027 and 2028 by approximately 20%. They anticipate strong domestic infrastructure spending will help the company achieve its FY27 sales volume target of 22.5 million tonnes, including an estimated 0.6 million tonnes from RINL integration. However, this positive outlook is tempered by significant cost pressures.

Key Risks: Input Costs and Demand Outlook

Imported coking coal, a critical raw material for steel production, has seen a sharp price increase from ₹18,200 per tonne in Q4FY26 to an estimated ₹21,000-₹21,800 per tonne in April-May 2026. This surge poses a significant threat to margin sustainability, potentially negating the gains from higher steel prices. SAIL's commodity steel focus makes it vulnerable to global price swings. Furthermore, high global crude oil prices could reduce demand in key sectors like automotive and construction, a risk not fully offset by domestic infrastructure projects. Competitors like Tata Steel and JSW Steel are also pursuing market share through capacity expansions and specialty products, which could increase pressure on SAIL in commodity segments. Historically, SAIL's stock performance has been closely tied to raw material price volatility.

Analyst Price Targets and Ratings

Despite these risks, Prabhudas Lilladher maintained their 'Accumulate' rating on SAIL and set a revised target price of ₹209. This target is based on a 5.5 times March 2028E Enterprise Value to EBITDA multiple. The firm acknowledges that sustained high coking coal costs and potential demand contraction are critical variables that could impact future earnings and valuation. Ultimately, SAIL's ability to effectively manage these external cost pressures and sustain volume growth will be key determinants of its future performance.