SYNOPSIS: PSU stock sees a 30% upside as ICICI Direct initiates a Buy rating, driven by rising domestic steel demand, capacity expansions, safeguard duties, attractive valuations, and strong revenue, profit, and production growth.
The shares of a Maharatna PSU company specialising in the production of iron and steel, operating as one of India’s largest state-owned steel makers, are in focus as ICICI Direct has initiated with a Buy rating, with an upside potential of 30 percent.
With a market capitalization of Rs. 62,137.24 crores in the day’s trade, the shares of Steel Authority of India Ltd declined upto 2.4 percent, making a low of Rs. 149.65 per share compared to its previous closing price of Rs. 153.80 per share.
What Happened
Steel Authority of India Ltd, engaged in the production of iron and steel, operating as one of India’s largest state-owned steel makers, is in focus after ICICI Direct has initiated coverage with a “buy” rating on the stock with a price target of Rs. 200 per share, indicating a potential upside of 30% from its previous close.
Reason for the Buy Target
Strong Demand Drivers: ICICI Direct believes that Steel Authority of India Limited (SAIL) is well-positioned to benefit from rising domestic steel demand, supportive government policies, and ongoing capacity expansion. Although India is the world’s second-largest consumer of finished steel, its per-capita steel consumption stands at around 103 kg, which is significantly lower than the global average of about 215 kg.
The government aims to increase crude steel capacity to 300 million tonnes and raise per-capita steel consumption to 160 kg by FY31, which is expected to create strong long-term demand for domestic steel producers like SAIL.
Capacity Expansion Plans: SAIL, one of the largest steel producers in India with a crude steel capacity of about 20 MTPA, is planning a major expansion to capture future demand growth. The company plans to expand the capacity of its IISCO Steel Plant from 2.5 MTPA to 7.1 MTPA by FY29, with an estimated capital expenditure of ₹36,000 crore. In addition, SAIL is implementing brownfield expansions and debottlenecking projects across its integrated steel plants to improve efficiency and increase production capacity.
Volume Growth Outlook: ICICI Direct estimates that SAIL’s consolidated steel sales volumes will grow at a CAGR of around 6% between FY25 and FY28E. As a result, total sales volumes are expected to increase from 17.9 million tonnes in FY25 to about 21.5 million tonnes by FY28, supported by higher domestic demand and improved production capacity.
Safeguard Duty Supporting Profitability: The brokerage believes that the safeguard duty on select steel imports will support domestic steel prices and improve profitability for Indian steel producers. In Q3 FY26, Steel Authority of India Limited reported an EBITDA of about ₹4,500 per tonne, with a ₹660 per tonne QoQ decline, the lowest among domestic peers.
ICICI Direct expects SAIL’s EBITDA per tonne to rise to ₹5,400 in FY26, ₹6,600 in FY27, and ₹7,500 in FY28E. Following the 12% safeguard duty imposed in December 2025, domestic steel prices have increased by over ₹5,000 per tonne.
Attractive Valuation Compared to Peers: From a valuation perspective, SAIL is considered attractive compared to other domestic steel producers. The company is currently trading at an EV/EBITDA multiple of around 6x for FY28E, while most other major steel companies trade at above 8x. According to ICICI Direct, this lower valuation, combined with a healthy balance sheet, provides an attractive risk-reward opportunity, especially considering the expected upcycle in the domestic steel sector.
Financials & Others
The company’s revenue rose by 11.77 percent from Rs. 24,490 crores in December 2024 to Rs. 27,371 crores in December 2025. Meanwhile, Net profit rose from Rs. 142 crores to Rs. 374 crores in the same period.
The company shows moderate capital efficiency, with a ROCE of 6.76% and ROE of 4.54%, indicating relatively modest returns on the capital employed and shareholders’ equity. Its debt-to-equity ratio of 0.58 suggests a balanced capital structure, meaning the company uses a reasonable level of debt without being overly leveraged.
The stock is currently trading at 1.08 times its book value, which places it close to its intrinsic accounting value and may indicate fair valuation. Additionally, the company has been maintaining a healthy dividend payout of 27.8%, reflecting a consistent approach to returning profits to shareholders.
Steel Authority of India Ltd (SAIL) is one of India’s largest state-owned steel-making companies, established in 1973 and headquartered in New Delhi. It operates under the Ministry of Steel, Government of India, and produces a wide range of steel products, including rails, plates, sheets, and structural steel. SAIL plays a key role in India’s infrastructure and industrial development.
The company has integrated steel plants across India, such as Bhilai Steel Plant and Rourkela Steel Plant, making it a leader in quality steel production. It focuses on technological innovation, environmental sustainability, and meeting domestic as well as international steel demand.
In the first nine months of FY’26, mining activities produced 25.925 million tonnes (MT) of iron ore, 0.648 MT of limestone, and 0.437 MT of dolomite. This raw material fed into production, resulting in 15.143 MT of hot metal, 14.350 MT of crude steel, and 14.241 MT of saleable steel. On the sales and marketing front, domestic sales reached 14.384 MT, exports accounted for 0.226 MT, totalling 14.610 MT in overall sales.
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