Citi raises Steel Authority of India price target to INR115 on trends

Citi raised its price target for Steel Authority of India Ltd (SAIL) to INR115.00 from INR95.00 but maintained a "Sell" rating, arguing that the first-quarter EBITDA per ton has likely peaked and is already priced in. The firm anticipates further downward pressure on steel prices due to muted demand, falling exports, and new supply, expecting corrections in EBITDA per ton despite SAIL's current 7x EV/EBITDA valuation based on expanded volumes. This outlook suggests Citi sees limited upside for the state-owned steel producer given anticipated market headwinds.

Analysis

Citi has raised its price target for Steel Authority of India Ltd (SAIL) to INR 115.00 from INR 95.00, an adjustment reflecting recent performance and revised estimates. However, this is critically juxtaposed with a maintained "Sell" rating, signaling a deeply bearish forward-looking view. The core of Citi's thesis is that SAIL's first-quarter EBITDA per ton has likely peaked and is already factored into the current valuation. The firm anticipates significant headwinds for the steel sector, forecasting downward pressure on prices driven by a combination of muted domestic demand, falling exports, and the introduction of new supply to the market. Based on expanded volumes and projected fiscal year 2025 debt, SAIL is currently trading at an EV/EBITDA multiple of approximately 7x. Citi expects this valuation to be unsustainable as further downside in steel prices will inevitably lead to a correction in the company's EBITDA per ton.

Key Decisions for Investors

• Investors should treat the price target increase to INR 115.00 with extreme caution, as the overriding "Sell" rating and forecast of peaking earnings suggest it is a valuation update rather than a bullish signal.
• Monitor key industry data points, specifically steel spot prices, export levels, and new supply announcements, as a deterioration in these metrics would validate Citi's bearish thesis and signal further downside risk.
• Given the forecast for contracting EBITDA per ton, holders of the stock should re-evaluate the risk-reward profile at the current 7x EV/EBITDA multiple and consider that the market may not have fully priced in the anticipated margin compression.
• Potential investors should be wary of entering new long positions until there is clear evidence that the expected downturn in steel prices and demand has stabilized or reversed.