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Informist, Monday, Feb. 10, 2025

By Rajesh Gajra

NEW DELHI – Despite an expected uptick in volumes, government-owned Steel Authority of India Ltd. may report weak revenue growth for the December quarter due to a drop in domestic prices amid a flood of low-priced Chinese imports into the country. Profitability too is likely to have contracted, and the bottom line growth will track the growth in operating profit and revenue.

For the quarter ended December, SAIL's net profit is seen at INR 1.71 billion on revenue from operations of INR 238.45 billion, according to the average of the estimates of 12 brokerages. The expected net profit is down 48% on year and 79% sequentially, while the estimated revenue is up 2.1% from the number reported for the same period of the previous year, and down 3.4% on quarter.

The bottom line estimates range from a net loss of INR 4.6 billion to a net profit INR 10.20 billion. The lowest estimate is by brokerage firm Prabhudas Lilladher while the highest is by Systematix Shares and Stocks (India). Among revenue estimates, Prabhudas Lilladher's INR 224.70 billion is the lowest, while Motilal Oswal Financial Services' INR 256.99 billion is the highest. The earnings before interest, tax, depreciation, and amortisation of SAIL for the December quarter is pegged at INR 18.97 billion, according to the average of the estimates of 10 brokerage firms.

In the September quarter, SAIL's revenue from operations had fallen 17% on year to INR 246.75 billion. The hit on SAIL's revenue in Jul-Sept was on account of a 14% on-year fall in sales volume at 4.10 million tonnes and lower sales realisation due to a fall in steel prices. The revenue drop in the September quarter was the worst in at least 17 quarters. Sequentially, however, SAIL's revenue was up 2.8% on the back of a 2.2% increase in sales volume.

The steel major had posted a net profit of INR 8.34 billion for the September quarter. In the same quarter of the previous year, there were exceptional loss items of INR 4.15 billion. Adjusting for this, the net profit was down 50% on year in the September quarter.

In a conference call with investors after the September quarter earnings, SAIL's management had said the company's sales volume target was around 18 million tonnes for 2024-25 (Apr-Mar). In Apr-Sept, the company had sold 8.11 million tonnes of steel. According to the management, while domestic demand prospects for steel were in the company's favour, demand from China continued to be very low due to sustained weakening in that country's real estate sector.

Brokerage Kotak Securities' institutional equities division estimates SAIL's volume growth in the December quarter at 12% on year and 4% sequentially. Most brokerage firms, however, expect the net realisations of the steel major to be quite weak.

YES Securities expects SAIL's top line to be flattish on a year-on-year basis and down 5% sequentially, "primarily led by lower realizations due to weak global steel pricing and rising Chinese exports". Kotak expects the company's steel realisations of the company to fall 10% on year and 2.2% on quarter on the back of lower steel prices.

SAIL's profitability will benefit from a fall in coal costs, but it is likely to be offset by the impact of weak net sales realisations. According to Kotak's estimates, earnings before interest, tax, depreciation per tonne is likely to fall 18% on year but jump 49% sequentially. 

Brokerage Sharekhan expects SAIL's operating margin to be 8.3% for the December quarter, down 90 basis points from the year-ago quarter and up sharply by 309 basis points on a sequential basis.

The company will detail its December quarter earnings on Tuesday. Post the announcement, according to Motilal Oswal, investors will await the management's commentary on domestic and international steel prices, and capex. Management guidance on the debt reduction road map will also be monitored, the brokerage said.

At 0948 IST, shares of the company were down 3.8% at INR 106.10 on the National Stock Exchange of India.

Following are the Oct-Dec standalone earnings estimates for Steel Authority of India based on reports from 12 brokerage firms in descending order of estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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