Posted on February 12, 2025, by Niftynews
Shares of Steel Authority of India Ltd (SAIL) rose by 3.5% in early trade on February 12, 2025, following the release of its Q3FY25 results. Despite a sharp 66% decline in net profit due to increased expenses and pricing pressures, the SAIL share price attracted buying interest as SAIL continued to see revenue growth, albeit at a slower pace. However, the SAIL share price is still 41% below its 52-week high, signaling ongoing challenges in the steel market.
Q3FY25 Earnings Overview
SAIL reported a consolidated net profit of ₹141.89 crore for Q3FY25, marking a significant decline from ₹422.92 crore in the same quarter of the previous year. The profit decline was mainly attributed to higher input costs and pricing pressures in the steel industry. On a sequential basis, the profit after tax (PAT) plunged by 84% from ₹897 crore recorded in Q2FY25.
However, the company showed resilience in its revenue generation, which grew by 5% year-on-year, reaching ₹24,490 crore compared to ₹23,349 crore in Q3FY24. On a quarter-on-quarter basis, revenue slightly dipped by 0.75% from ₹24,675 crore in Q2FY25.
At the operational level, SAIL EBITDA fell by 5.3% year-on-year, from ₹2,142.5 crore in Q3FY24 to ₹2,029.6 crore in Q3FY25. The EBITDA margin contracted to 8.3% from 9.2% in the same quarter last year, reflecting the margin pressures arising from higher production costs and declining steel prices.
Management Commentary
SAIL Chairman, Amarendu Prakash, acknowledged the challenges faced by the company, particularly the falling steel prices and the influx of cheap imports. However, he remained optimistic about the company’s ability to navigate these headwinds.
“In the face of a challenging steel market characterized by declining prices and an influx of cheap imports, SAIL has managed to achieve better EBITDA during Q3FY25 compared to the corresponding period last year. We remain steadfast in our commitment to boosting production and enhancing cost efficiency while also exploring greener technologies. With appropriate interventions, we expect the issue of cheap imports to be addressed, and the government’s infrastructure push to drive domestic steel demand further,” Prakash said.
Analyst Take: Should You Buy?
Despite the sharp profit decline, analysts believe that SAIL revenue growth reflects resilience in demand, especially in light of challenging market conditions. However, persistent margin pressures remain a key concern for investors.
Anshul Jain, Head of Research at Lakshmishree Investment and Securities, noted, “Although the profit slump is concerning, revenue growth is steady, driven by higher sales volumes. However, rising input costs and pricing pressures continue to weigh on profitability. Investors will likely monitor cost-control measures and steel price trends to assess SAIL’s near-term outlook.”
Technical View
On the technical front, Sumeet Bagadia, Executive Director at Choice Broking, stated that SAIL share price has been consistently trading above the ₹100 mark, which indicates potential for an uptrend. “Once the SAIL share price breaks above the ₹104 to ₹105 range, it could touch the ₹115 mark in the near term. Existing shareholders can hold the stock with a stop loss at ₹98 and target ₹115. New investors may consider entering above ₹105, with the same stop loss level.”
Stock Performance and Outlook
Following the Q3FY25 earnings announcement, SAIL share price rose by 3.5%, touching ₹103.65 in early trade. However, the SAIL share price still remains 41% below its 52-week high of ₹175.65, which was recorded in May 2024. At the same time, the stock has recovered 4% from its 52-week low of ₹99.55, hit in January 2025.
Despite the recent uptick, SAIL stock has been on a declining trend over the past year, shedding over 18% in the last 12 months. It has also dropped nearly 5% in February so far, continuing its downward trend for the third consecutive month. It fell 5% in January and over 3% in December 2024, reflecting persistent selling pressure on the stock.
Conclusion
While SAIL has reported steady revenue growth, the 66% profit decline and ongoing margin pressures indicate that the company is facing significant challenges in the current steel market. However, the recent uptick in SAIL share price post-earnings highlights investor optimism driven by the company’s revenue resilience and management’s focus on improving cost efficiency and addressing import issues.
For investors considering SAIL share price, it may be wise to keep an eye on steel price trends and the company’s cost control measures. The stock may see short-term momentum if it crosses the ₹105 resistance level, but persistent operational challenges could weigh on its performance in the near term.
