SAIL - Expect Bumper Steel Sales in Q4 FY21

Steel (Ferrous Steel) makers always have Q4 as the best quarter from product off take, as respective deadlines of FY need to be met by the Infrastructure sector. This Q4 will be vastly different, as about 15 days of Q4FY20 was largely impacted by Covid, thus Q4 FY21 will show good traction on YoY basis, in terms of better quantum and realisation. Tata Steel and JSW Steel are not showing sales volume growth in FY21 (as both seen hit its rated capacity), while  Jindal Steel & Power (JSPL) and SAIL are seen big beneficiary of this growth. JSPL on Friday informed exchanges of 14% YoY sales growth for February, with production rose by 18% on YoY basis, which hints of better sales volume growth for March as well.

Taking cues from these data, we are keeping an extremely positive view on SAIL. In Q3FY21 SAIL had sales of 41.5 lakh tonnes (40.9 lakh tonne in Q3 of FY20), which was at 105.9 lakh tonne in 9M of FY 21 (against 104.5 lakh tonnes in 9M FY20). Last year, in Q4 of FY20, SAIL had sales of 37.44 lakh tonnes, due to production and despatche loss in last 15 days of FY 20, due to Covid.

In Q4 of FY21 , SAIL should report a sales of over 43 lakh tonnes, thus showing  a YoY growth of about 15%. FY 21 may see a growth of 5% at 149 lakh tonnes against 142 lakh tonnes of FY20. SAIL will also be booking price differentials to be realised from Auto OEM, after rate contract finalisation with them at higher rates. SAIL has also made sales of Rs. 5,370 crore in 9M of FY21, and cumulatively of Rs. 13,420 crore till 31-12-20, to certain Govt agencies, while these agencies were invoiced at a provisional price, till a final price is subsequently agreed. SAIL is expecting this differential to get booked in Q4 of FY21 as well. Q3FY21 PBT was at Rs. 3,815 crore, which insiders are expecting it at over Rs. 5,000 crores for Q4 FY21, while PBT for Q4FY20 was at Rs. 2,501 crore.

Will SAIL be a Steely stock for FY22 as well, stealing shine from other steel makers?

This is not a buy recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.