10% Dividend Ahead: PSU Steel Stock Near 52-Week High, Record Date Fixed For Next Week: BUY, Sell, Or Hold?

Steel Authority Of India (SAIL) share price witnessed bullish sentiment so much so that the stock neared its 52-week highs on BSE. Midcap SAIL is trending after fixing its record date for an interim dividend of 10% ahead. However, brokerages are of mixed opinion on SAIL shares after its mixed earnings in Q3FY24 with weak demand taking a toll on volumes.

SAIL Share Price:

On February 15, SAIL shares ended at Rs 125.70 apiece, up by 2.24% with a market cap of Rs 51,915.26 crore. This is near its 52-week high of Rs 150 apiece.

The stock has gained by over 48% on BSE in six months, while in a year, the upside is 47%.

SAIL Dividend:

SAIL's board declared an interim dividend of Rs 1 per share having a face value of Rs 10 each ( 10% of the paid-up equity share capital of the Company). The record date for payment of Interim Dividend is February 20, 2024. This will be the first interim dividend for the current fiscal.

In FY23, SAIL paid up to 15% dividend amounting to Rs 1.5 per share.

At the current price level, SAIL's dividend yield is at 1.19%.

Should You Buy, SELL, Or Hold SAIL Shares?

Motilal Oswal: (NEUTRAL)

SAIL is planning to undertake multiple expansion capex to augment the installed capacity to 35mt by FY30-31. However, considering that no new facilities would come on stream over the next two to three years, SAIL will focus on enhancing the existing productivity and ramping up the utilization levels.

As the capex intensity is expected to pick up post FY25/FY26, it would limit the deleveraging going ahead, and thereby, exert pressure on the balance sheet and cash flow.

In line with 3QFY24 financial performance and improved outlook, we have slightly improved FY24E/FY25E/FY26E EBITDA estimates by 1.4%/4.5%/3.5%. SAIL trades at an FY26E EV/EBITDA of 5.8x. We believe that the stock is fully priced at current levels. We reiterate our Neutral rating on the stock with a revised TP of Rs 130.

Elara Capital: (SELL)

Given the lag impact of high coking coal prices and soft steel prices, the margin may come under pressure. Furthermore, the recent suspension of key officers in the company may slow down the decision making process. Absence of any major capacity addition in the next two years may result in SAIL's underperformance versus its peers on the volume front. While we largely retain FY25E-26E EBITDA estimate, we cut it to ~10% for FY24E, to factor in weak volume in Q3FY24.

As we roll over to December 2025E from September 2025E, we raise our TP to INR 108 from INR 104, on 4.5x (unchanged) December 2025E EV/EBITDA. As SAIL is up ~40% since the release of our report 'Railway
arrears lift profitability', dated 17 November 2023, we revise our rating to Sell from Accumulate.

Nuvama: (NEUTRAL)

The brokerage has maintained reduce on SAIL for a target price of Rs 96 per share. However, the outlook is kept at NEUTRAL.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.