SAIL Share price closed at Rs 83.3, up Rs 4.5 or 5.7%. SAIL share price moved from Rs 71 to Rs 83.3 in one week, up over 17%. Sumeet Bagadia, Executive Director of Choice Broking has recommended SAIL to investors. He said SAIL stock should be bought in cash above Rs 80 with a stop-loss of Rs 78 and a target price of Rs 88 - Rs 90. He provides the reasoning behind this recommendation - on the daily timeframe, the stock has been forming the Ascending Triangle Pattern, which is  a bullish continuation pattern and indicates buying  activity. Moreover, the rise in volume has witnessed an upward trend for the long term, which indicates buying interest among the traders. The price is also trading above Ichimoku Cloud formation with positive crossover and also trading above 100 SMA. A momentum indicator RSI & Stochastic showed positive crossover which suggests positive sentiments. So based on the above technical structure, Sumeet is recommending long positions on SAIL for the target of 85.

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Motilal Oswal says with limited capex and higher pricing; SAIL should drive significant deleveraging and boost equity value. Motilal Oswal estimates net debt to decline by Rs 232 bn (Rs 56/sh, 76% of CMP) over FY20-23E to Rs 305 bn. Motilal Oswal also expects higher dividend payouts going forward (implying 5% yield), supported by strong FCF of Rs 19/sh (25% yield). Motilal Oswal also raised its FY22E/FY23E EBITDA estimate by 34%/37% and TP by 28% on expectation of higher realization and volumes. The stock trades at 4.2x FY22E EV/EBITDA, a 25-30% discount to peers Tata Steel and JSW Steel. Motilal Oswal has raised target price on SAIL to Rs 104.

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Motilal Oswal sees Steel Authority of India (SAIL) as the best play on higher steel prices as:

1)       it is backward integrated with captive iron ore
2)      has a higher operating leverage due to high conversion cost
3)      has a higher financial leverage

Motilal Oswal finds Valuations attractive:

Motilal Oswal says that at the CMP, the stock is trading at 4.2x FY22E EV/EBITDA, which is at a 25% - 30% discount to peers Tata Steel and JSW Steel. Even on FY22E P/BV, it is trading at an attractive 0.6x, despite an expected strong RoE of 16%. Motilal Oswal values the stock at 5x FY22E EV/EBITDA at INR104/share, implying a target P/B of 0.8x (historical average of 0.7x).

SAIL Key risks:

Lower steel price and higher capex