Steel Authority of India LtdQ2 FY23
Steel Authority of India Ltd Q2 FY23 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹171P/E: 20.7Market Cap: ₹79.5K CrSector: Ferrous Metals
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
N/A
Order
N/A
Capex
Yes
1 of 3 growth signals are positive — mixed outlook.
Full analysisRevenue guidance
Category 3- →SAIL has registered strong volume growth in Q1 FY24 with crude steel production up 7% and sales volume up 23% over the previous year.
- →Domestic demand remains robust with a 25% increase in domestic sales volume.
- →The company targets a total production of 19 million tonnes for the current financial year.
- →Expansion plans are underway at four major plants to increase capacity by 15 million tonnes by FY31-32.
- →Debottlenecking projects aim to add 3-3.5 million tonnes capacity over 3-3.5 years.
- →Maintenance capex around INR 1,500-2,000 crores annually will continue; growth capex includes large projects starting order placement by end FY23.
- →Optimism on improving margins as coking coal prices stabilize and domestic consumption outlook improves.
- →NSR (Net Sales Realization) expected to stabilize and improve from Q2 onwards, aiding revenue growth.
Margin guidance
Category 3- →SAIL expects improved operational efficiency and positive market conditions in coming quarters, suggesting optimism for future profits.
- →EBITDA per tonne is expected to expand reasonably, supported by lower coking coal prices and stabilized steel prices.
- →Production growth targets include a 19 million tonnes steel production for FY24 with expansion projects planned to increase capacity by 3 to 3.5 million tonnes through debottlenecking over 3 to 3.5 years.
- →Capital expenditure of INR6,800 crores for FY24, including around INR1,500-2,000 crores for maintenance and the rest for debottlenecking and expansion.
- →Deleveraging is planned, targeting a reduction of borrowings by around INR4,000 crores to around INR22,000-22,500 crores.
- →NSR (net sales realization) is expected to stabilize with potential improvement in Q3-Q4 due to demand revival and stabilized coal costs.
- →Loss-making units like Salem Steel Plant and VISL are currently incurring losses, impacting overall profitability.
- →Overall, earnings growth depends on raw material costs, pricing environment, and execution of expansion plans.
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Fundraise plans
- →No explicit mention of plans for new fundraising through equity was made during the call.
- →Debt levels increased to INR 29,414 crores due to working capital buildup mainly from coal prices.
- →Management expects borrowings to reduce by around INR 4,000 crores in the medium term, targeting borrowings to come down to INR 22,000-22,500 crores by year-end.
- →The reduction in debt depends on coal costs and net sales realization (NSR) during the coming quarters.
- →No direct statement about raising fresh debt or equity; focus seems on deleveraging via cash flow management.
- →Capital expenditure plans remain active with INR 6,800 crores capex targeted for the year, but financed through existing means rather than new fund raising.
Order book
- →Several expansion and debottlenecking projects at plants like IISCO Steel Plant, Bokaro, Durgapur, and Rourkela have received in-principle or board-level approval.
- →Orders for capacity increase projects, including blast furnace expansions at Durgapur and Bokaro, and standard batteries at other plants, are under tendering.
- →Expected order placement for these projects is by the end of 2023 to initiate cash outflows starting next year.
- →Pellet plant orders have been placed for a 1 million tonnes per annum plant at July; MDO orders for a 4 million tonnes pellet plant at Gua are expected by mid-2024.
- →Additional pellet plants are being planned/tendered at Rourkela, IISCO, Durgapur, and Bokaro.
- →The capex for debottlenecking 3-3.5 million tonnes is planned over 3-3.5 years, with phased commissioning.
- →Overall, multiple orders are pending placement to enable expansions totaling about 15 million tonnes by 2031-32.
Capex plans
Yes- →Current year capex target is INR 6,800 crores.
- →Maintenance capex is around INR 1,500-2,000 crores; remaining is mostly for debottlenecking and includes JV share.
- →Debottlenecking projects targeting 3-3.5 million tonnes capacity increase; timeline around 3 to 3.5 years.
- →Expansion plans for 4 major plants by 2031-32:
- → - IISCO Steel Plant: 4.5 million tonnes capacity increase, tendering stage.
- → - Bokaro Plant: 4 million tonnes plant (brownfield expansion) plus debottlenecking.
- → - Rourkela Steel Plant: 2 million tonnes plant, tendering stage.
- → - Additional potential pellet plants at Durgapur or Bokaro if pellet shortage arises.
- →Tasra mine approved to add 1.6-1.7 million tonnes of indigenous coking coal through an MDO.
- →Capex for expansion expected to ramp up after order placement; peak capex in coming years could be around INR 8,000-10,000 crores.
- →Focus on internal beneficiation and pellet plants for raw material integration.
How does Steel Authority of India Ltd rank vs peers in Ferrous Metals?
Pro feature1Steel Authority of India Ltd
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