BackSAIL surprises with better cost controls
SAIL surprises with better cost controls
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SAIL’s shares, however, fell 3.7%, tracking the correction in the markets on Wednesday. The stock is now only about 20% lower compared to its peak in early 2008, although the outlook for the industry seems far more precarious.
Thanks to the recovery in demand and a sharp drop in operating costs, production of steel has risen considerably across the globe. As Credit Suisse India stated in a 30 November report: “We fear global production, excluding China, may cross the prior peak by March-April 2010. Along with the continuing overhang of Chinese exports, this may pre-empt a price recovery."
Of course, the gloomy view of the sector is not shared by all, but even so the fact that the share trades 20% lower than its earlier peak is a cause of concern. In early January, the stock had risen to over Rs250, or just 6% short of its early 2008 peak. So things are now slightly better on the valuation front. SAIL is also better placed than its peers in terms of access to raw materials and a lean balance sheet.
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