SAIL - Q1FY23 - Result Update - 12082022 - 12-08-2022 - 17
SAIL - Q1FY23 - Result Update - 12082022 - 12-08-2022 - 17
SAIL - Q1FY23 - Result Update - 12082022 - 12-08-2022 - 17
Coking coal consumption costs: The spot coking coal prices stood significantly high in Financial & Valuations
Mar-May’22 (~$500-600/t) due to a supply crunch. The spot prices have corrected Y/E Mar (Rs Cr) FY23E FY24E FY25E
significantly from the peak to a current level at $230-240/t. However, the benefit of the lower
Net Sales 91,043 89,844 92,968
coal prices will flow through only from mid-Aug’22.
EBITDA 12,805 11,379 13,460
Increase in Net debt in Q1FY23: Gross debt increased to Rs 22,101 Cr in Q1FY23 Net Profit 6,035 5,084 6,545
(Q4FY22 at Rs 19,385 Cr), while cash came down marginally in Q1FY23 from Rs 786 Cr in EPS (Rs.) 14.6 12.3 15.8
Q4FY22. The increase in net debt is mainly due to higher WC requirement on coal PER (x) 5.4 6.4 5.0
purchases (WC increase by Rs 8,000 Cr) along with Capex spend of Rs 1,000 Cr. Inventory
P/BV (x) 5.7 5.4 5.0
days jumped to 110 days (from 70 days in Q4 and 99 days in Q1FY22).
EV/EBITDA (x) 3.7 3.8 2.8
Capex guidance unchanged: In Q1FY23, Capex stood at Rs 1,000 Cr, against annual ROE (%) 10.9 8.7 10.5
guidance of Rs 8,000 Cr for FY23. The management keeps its guidance unchanged,
expects the orders to fructify this year, and spending to gather pace from Oct-Nov’22. The Change in Estimates (%)
company has multiple projects in the pipeline mainly toward de-bottlenecking on the Y/E Mar FY23E FY24E FY25E
upstream side.
Sales -10% -2% 5%
Sales volume guidance: The management ruled out any shortfall on its sales volume EBITDA 27% -7% 16%
target for the year. In Q1FY23, the saleable steel volumes stood down at 3.15 MT down PAT 38% -9% 28%
5%/33% YoY/QoQ. It stated that it foresees domestic consumption to increase post-
monsoon with pick up in construction and infrastructure activities. The company had sales ESG disclosure Score**
of 1.4 MT in Jul’22, and its targeting maximum sales in Aug’22. Environmental Disclosure 39.78
Dec-21
Aug-20
Aug-22
Jan-20
1
Key Concall Highlights (Cont...)
Coking Coal consumption cost: In Q1FY23 the imported coking coal cost stood at Rs 39,500/t vs..~Rs 29,000/t in Q4FY22. In Jul’22
it has corrected marginally to~Rs 38,000/t but is expected to come down by Rs 4,000-5,000/t in August and come down further in
September. As a result, the Q2 coal price will be lower QoQ. The company blends the imported coal with indigenous coal, which costs
lower at Rs 13,000/t and forms ~14-15% of total coal cost.
Net sales Realisations (NSR): In Q1FY23 blended average net sales realisation stood at Rs 66,829/t (Q4FY22 blended NSR: Rs
59,495/t and Q1FY22: 53,929/t). With the fall in steel prices, the Realisation in June stood at Rs 58,000/t and declined further in July at
Rs 57,000/t and in August the NSR is almost flat MoM. The Management expects some improvement from August onwards with the
pick up in demand post monsoon. SAIL has higher long products in its portfolio as compared to Peers and management said it
witnessed more resilience in long products prices against flat products. The difference between the flat and long NSR in Q1 stood at
~Rs 7,000-8,000/t.
Wage bill: The company expects employee expenses to soften to a steady-state level of Rs 12,000 Cr from Rs 12,862 Cr in FY22 as it
has already taken a major hit on the wage bill led by the actuarial valuation of leave encashment and gratuity (Rs 700-800 Cr impact),
and employee training cost in FY22.The focus will be on productivity improvement.
Other Points:
No inventory losses booked.
Sale of iron ore: No sales of iron ore in Q1FY23, waiting for the right price for sales.
Higher other expenses in Q1FY23: Royalty cost went up by Rs 400Cr and booked forex losses of ~Rs 500Cr.
Export Duty Revocation: Not much headway on export tariff, following up with Indian steel association.
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Change in Estimates
EBITDA 12,805 11,379 13,460 10,053 12,242 11,627 27% -7% 16%
PAT 6,035 5,084 6,545 4,362 5,570 5,108 38% -9% 28%
Results Review
Q1 FY22 Q4 FY22 Q1 FY23 Q1 FY23
Actual Actual Axis Sec Est Actual YoY QoQ Vs Axis
Saleable steel Production (Mn t) 3.77 4.44 4.04 4.10 9% -8% 1%
Saleable steel Sales (Mn t) 3.33 4.71 3.64 3.20 -4% -32% -12%
Consumption of Raw Materials 6,374 14,564 14,669 17,701 178% 22% 21%
Increase/Decrease in Stocks -785 2,014 -1,181 -6,189 NA -407% NA
Employees Cost 2,773 3,035 2,911 3,019 9% -1% 4%
Other Expenses 5,713 6,807 6,284 7,196 26% 6% 15%
Total Expenditure 14,075 26,421 22,683 21,727 54% -18% -4%
3
Financials (consolidated)
Profit & Loss (Rs Cr)
Y/E March FY 22A FY 23E FY 24E FY 25E
4
Cash Flow (Rs Cr)
Y/E March FY 22A FY 23E FY 24E FY 25E
Profit before tax 16,292 7,806 6,499 8,559
Depreciation 4,275 4,776 4,973 5,169
Interest Expenses 1,607 996 806 662
Non-operating / EO item (580) 542 535 553
Change in W/C 9,484 1,444 139 (363)
Income Tax (92) - - -
Operating Cash Flow 30,987 15,565 12,951 14,580
Capital Expenditure (3,665) (7,000) (7,000) (7,000)
Free cash Flow 27,321 8,565 5,951 7,580
Other Investments (310) - - -
Investing Cash Flow (3,976) (7,000) (7,000) (7,000)
Proceeds / (Repayment) of Borrowings (22,409) (500) (3,000) (2,000)
Finance cost paid (1,922) (996) (806) (662)
Dividend paid (3,067) (3,614) (1,781) (1,501)
Financing Cash Flow (27,398) (5,110) (5,587) (4,162)
Change in Cash (387) 3,454 364 3,418
Opening Cash 518 786 4,240 4,605
Closing Cash 132 4,240 4,605 8,022
5
SAIL Price Chart and Recommendation History
(Rs)
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About the analyst
Email: aditya.welekar@axissecurities.in
Analyst Bio: Aditya Welekar is PGDBM in Finance with 10 years of experience in Equity Market/Research.
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