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As Steel Companies Raise Prices, Motilal Oswal Bets on SAIL

Published 30-03-2021, 11:20 am
© Reuters.

By Aditya Raghunath

Investing.com -- Shares of steel companies are trading higher today after it was all but confirmed that they are going to raise the price of steel by Rs 2,000 – Rs 3,000 a tonne. Tata Steel Ltd (NS:TISC) is up 4.19% to Rs 799, JSW Steel Ltd (NS:JSTL) is up 4.41% to Rs 464.85, Jindal Steel & Power Ltd (NS:JNSP) is up 4.57% at Rs 339 while Steel Authority of India Ltd. (NS:SAIL) is up 4.43% to Rs 80.15 at the time of this report.

There is a tight demand-supply situation in India and China's HRC export price is high too which points to a situation where steel companies will call the shots in 2021. Brokerage firm Motilal Oswal Financial Services Ltd (NS:MOFS) says that SAIL is the best bet on higher steel prices thanks to its better financial status, higher operating leverage, and backward integration with captive iron ore.

Motilal Oswal has recommended a ‘buy’ on SAIL stock with a price target of Rs 104, an increase of almost 27%.

The brokerage also says that the company trades at a 25-30% discount to its peers Tata Steel and Jindal Steel. SAIL has reduced net debt by Rs 9,400 crore to Rs 44,300 crore and Motilal Oswal expects it to reduce to Rs 23,200 crore. It also expects a higher dividend payout going forward at around 5-7%.

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