Steel Authority of India (SAIL): A PSU Giant Making Waves in 2024!

Steel Authority of India (SAIL) needs no introduction. In recent weeks, there have been many major developments for the PSU company. Shares of the iron & steel maker are up nearly 33% so far in 2024. In fact, SAIL shares recently surpassed key levels and broke out of underperformance to trade at decadal highs. Investors need to understand some critical details before they decide to buy/sell SAIL. Let's first understand the reasons behind the sharp rally in SAIL share price.

Why is SAIL's Share Price Soaring?

Strong Sectoral Outlook:

On 24 April 2024, the BSE Metal index rallied 3% to become the top gainer during the day as the rise in base metal prices sent metal and steel stocks to multi-year highs. Commodity prices have started to shoot up, signaling a potential commodity supercycle. Metal stocks have seen a sharp spike, with key metals like Copper, Aluminum, and Zinc trading at multi-year highs. The strong industrial growth in China has boosted Indian metal stocks, with experts predicting further policy easing by the Chinese central bank to stimulate the economy.

SAIL's Undervaluation Against Peers:

Investors are favoring SAIL over its peers Tata Steel and JSW due to its cheaper valuations. Despite having similar steel capacities, SAIL's market cap is only a fraction of Tata Steel and JSW. SAIL's undervaluation is partly due to its classification as a PSU. However, with strong momentum in the stock and robust credit profile, SAIL is poised for further growth. Currently trading at a price to book value (P/BV) multiple of 1.2x, compared to its 5-year average of 0.7x, SAIL presents an attractive investment opportunity.

What's Next for SAIL?

Going forward, investors are hopeful that SAIL will continue its momentum as demand is expected to rise with the government's expansion plans in sectors like infrastructure, auto, railways, etc. SAIL boasts strong financials, with decreasing debt over the past 5 years. The company is set to announce robust Q4 numbers, following its best-ever physical performance in the first nine months of FY24. With major expansion plans in the pipeline, including capacity increase to 15 million tons by 2030-31 and upgrades to the Rowghat mine, SAIL is positioned for long-term growth.

Performance and Prospects

In the past 5 trading sessions, SAIL's share price has surged by 15%, reflecting investor optimism. With a 52-week high of Rs 167 and a 52-week low of Rs 81, SAIL has demonstrated strong growth potential. Over the past year, the company's shares have rallied by an impressive 103%. As one of the largest public sector steel companies in India, SAIL has a diversified product range catering to various industries and international markets. With operational and financial autonomy, SAIL is well-positioned to capitalize on the growing demand for steel in India and globally.

In conclusion, Steel Authority of India (SAIL) is riding high on the back of a strong sectoral outlook, undervaluation against peers, and robust growth prospects. With a focus on expansion and improving financials, SAIL is a compelling investment opportunity in the steel sector. Investors looking for exposure to the burgeoning steel industry should consider adding SAIL to their portfolio for long-term gains.