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Steel Authority of India (SAIL) reported an in line revenue (up 32% YoY) in 4QFY22, driven by an improved mix of higher ASP and sales volume. Reported EBITDA was greater than estimate as consumption of higher cost coal will occur in 1QFY23.

“Recently, the government announced various measures to cool down prices. This resulted in an 11% correction in the stock. It has corrected by ~50% from its 52-week high on fears of waning demand, input cost inflation, and the recent imposition of export curbs. However, the underlying demand cannot be deferred forever. The CMP factors most of the risks, if not all," said brokerage Motilal Oswal in a note.

The brokerage expects coal prices to start correcting, which will support profitability for SAIL. It has maintained its Buy rating on the metal stock with a target price of 90 per share. There could still be short-term pain, but the risk-reward ratio is now in its favor as most of the negatives are priced in.

“SAIL’s financial performance is extremely sensitive to coking coal costs due to a higher percentage of coal cost in its RM mix as compared to its peers. We expect its 1QFY23 result to be adversely impacted by higher coking coal cost," the note stated.

The steel giant has reported a 28% fall in its consolidated net profit to 2,478.8 crore for the fourth quarter ended March 2022, mainly on account of higher expenses. During the quarter under review, the company's total income rose to 31,175 crore.

SAIL share price has fallen 10% in the last five trading sessions. The stock has declined more than 40% in the past year whereas is down more than 33% in 2022 (YTD) so far.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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