Earnings Outlook: SAIL may sail through on sales but PAT seen diving

8 Aug 2022

Steel Authority of India Ltd is expected to report a net sales of 244.7 bln rupees, up 19% on year, for the quarter ended June according to an average of the estimates by four brokerage houses.

The net profit is pegged between 5.3 bln rupees and 7.6 bln rupees, down 80-86% on year, according to estimates by three broker firms. Another broker firm, IDBI Capital Market Services, estimates SAIL’s net profit to be further lower at 3.1 bln rupees.

The company will declare its June quarter results on Wednesday.

Analysts see the topline aided by single-digit volume increase and double-digit rise in steel prices in Apr-Jun as compared to the year ago period.

Brokerage Kotak Institutional Equities sees SAIL’s volume going up by 6% on year and steel realisation to increase by 10% due to higher steel prices in the domestic market.

The operating margin of SAIL may fall in Apr-Jun “due to impact of higher coking coal prices,” according to brokerage Axis Securities.

"Higher coking coal costs and rigid employee costs will lead to sharp fall in EBITDA/t (operating profit per tn) for SAIL compared to its peers," said brokerage, IDBI Capital Market Services.
    
Sequentially, SAIL’s net sales are seen lower by 20%, and the net profit estimate is 68-78% lower.

After the company announces its June quarter results on Wednesday, investors will monitor company guidance on volume for 2022-23 (Apr-Mar), and updates on capital expenditure incurred and planned.