Axis Securities is bullish on Steel Authority of India after the share price jumped 7% in 5 trading sessions. The domestic brokerage house upgraded the rating to ‘Buy’ from ‘Hold’ and also raised the target price by 13% to Rs 130 from Rs 115 in the backdrop of 12% safeguard duty on select steel imports. The brokerage expects a 19% upside from the current market price.
Safeguard duty a positive for local steel manufacturers
On March 18, the Directorate General of Trade Remedies (DGTR) proposed a 12% safeguard duty on select steel imports for 200 days to protect domestic steel producers. Earlier, the heightened Chinese steel import was becoming a big problem for domestic companies.
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China’s steel exports grew by 22% YoY to 111 metric tons in 2024, a level last seen in 2015, which was at 112 MT. This led to lower regional steel prices and raised the import in India. However, steel net imports have now declined to 0.2 MT in February 2025 on account of the DGTR probe for the imposition of safeguard duties.
Although the domestic steel mills already took a price hike in anticipation of this news in the first week of March 2025. “Speculation of implementation of the safeguard duty along with cooling imports led to price hikes by the leading steel mills in early March for HRCs and CRCs up to Rs 1,100-1,500/t for Mar’25 sales,” said Axis Securities.
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The company’s total borrowings currently stand at Rs 32,600 crore, down from Rs 35,596 crore as of the end of Q2 FY25. The company has guided to reduce the borrowings to Rs 30,500 crore, which will be similar to the level seen at the end of FY24.
During the expansion phase, SAIL will target a debt-to-equity ratio of 1:1. However, The plan to execute this is risky because the expansion capex kicks in from FY27 onwards.
“SAIL’s next phase of the Capex wave will continue to keep the street cautious on the stock as it completed its earlier hot metal expansion plan from 14.6 MT to 25 MT after significant delays and Capex overruns,” said Axis Securities.
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