Summary of earnings call for Steel Authority of India Ltd published on 01 Aug, 2025
Steel Authority of India Limited (SAIL)
Q1 FY26
Call date · July 28, 2025
1 · Management Commentary
Key Positives
- Saleable steel production rose 12% YoY to 4.7 million tons; sales volume up 15% YoY to 4.55 million tons—best ever Q1 sales.
- Profit before tax grew over 2.7x to INR890 crores (vs INR326 crores YoY, before exceptionals).
- Borrowings reduced by INR1,100 crores in Q1 to INR28,741 crores.
- Operational efficiencies improved: lower fuel rate, reduced coke rates, improved CO₂ emissions.
Key Negatives
- Turnover growth limited to 8% due to lower steel prices.
- EBITDA per ton of saleable steel declined YoY, mainly due to adverse stock valuation impact (~INR1,050 crores).
- Higher royalty on iron ore (INR173 crores impact vs Q4).
- Rising imports (24% in 2025) and global oversupply continue to pressure domestic prices.
Forward Guidance
- FY26 capex target set at INR7,500 crores (vs INR6,000 crores in FY25); Board approved; Q1 capex achieved INR1,642 crores.
- Major expansion at IISCO Steel Plant (4.5 mtpa) to commence from FY27; total IISCO capex estimated at INR36,000 crores over 3–4 years.
- Full-year sales volume guidance: ~18.5 million tons (SAIL products only).
- Q2 coking coal prices expected to remain flat QoQ; stock valuation impact seen as one-off in Q1.
- NSR for Q2 expected to be lower than Q1 due to seasonal price weakness, but recent weeks show signs of improvement.
- Ongoing focus on operational efficiency, sustainability, and CSR.
2 · Q&A Highlights
Q 1 (Composite): What is the outlook for coking coal costs and their impact on margins in Q2?
A (Management):
• Q2 coking coal prices expected to remain flat vs Q1; stock valuation impact is a one-time event in Q1 and will not recur in Q2.
• Cost of production should ease, supporting margins.
Q 2 (Composite): What are the capex plans and status of major expansion projects?
A (Management):
• FY26 capex target is INR7,500 crores; Q1 capex achieved INR1,642 crores.
• IISCO expansion (4.5 mtpa) to start from FY27, with total capex ~INR36,000 crores over 3–4 years; tendering underway, order placement expected by Q3/Q4 FY26.
Q 3 (Composite): How is the NMDC Steel marketing arrangement reflected in financials and what is its impact?
A (Management):
• 0.37 million tons of NMDC steel sold in Q1, revenue ~INR1,800 crores.
• Reflected as purchase of stock-in-trade and revenue; margin is breakeven to slightly positive.
Q 4 (Composite): What is the impact of stock valuation and iron ore royalty on Q1 results?
A (Management):
• Stock valuation impact in Q1 was ~INR1,050 crores (vs Q1 last year), mainly due to lower coking coal prices.
• Iron ore royalty impact was INR173 crores vs Q4.
• Both are not expected to recur at the same magnitude in Q2.
Q 5 (Composite): What is the sales volume and NSR guidance for FY26 and Q2?
A (Management):
• FY26 sales volume guidance: ~18.5 million tons (excluding NMDC).
• Q1 blended NSR: INR51,700/ton; Q2 NSR expected to be lower due to seasonal factors, but recent price trends are improving.
Q 6 (Composite): What are the current inventory levels and risk of further markdowns?
A (Management):
• Finished steel inventory at 1.7 million tons (vs 1.4 million tons in March); in-process stock at 1.3 million tons.
• Inventory valued at Q1 cost, which is at a low level; no further markdown expected unless coal prices fall further.
Q 7 (Composite): What is the status of railway pricing and its sensitivity to coking coal costs?
A (Management):
• Provisional rail price for FY26 is INR74,000/ton, reflecting lower coking coal costs; future prices will adjust with coal cost movements.
3 · Other Key Numbers
- Saleable steel production Q1 FY26: 4.7 million tons (Q1 FY25: 4.2 million tons)
- Sales volume Q1 FY26: 4.55 million tons (Q1 FY25: 4 million tons)
- Turnover growth: 8% YoY
- Profit before tax Q1 FY26: INR890 crores (Q1 FY25: INR326 crores before exceptionals)
- Borrowings as of 30 June 2025: INR28,741 crores (31 March 2025: INR29,811 crores)
- Q1 capex: INR1,642 crores
- FY26 capex target: INR7,500 crores
- Q1 blended coking coal cost: INR16,918/ton (Q4: INR17,653/ton)
- Q1 imported coking coal cost: INR17,600/ton (Q4: INR18,500/ton)
- Q1 EBITDA per ton: INR6,400 (Q1 FY25: INR6,000)
- Q1 blended NSR: INR51,700/ton (Q4: INR50,100/ton; July: INR50,000/ton)
- Q1 NSR (long): INR54,500/ton (Q4: INR53,300/ton)
- Q1 NSR (flat): INR50,400/ton (Q4: INR47,300/ton)
- Q1 stock valuation impact: INR1,050 crores (Q1 vs Q4: INR950 crores)
- Iron ore royalty impact Q1 vs Q4: INR173 crores
- Finished steel inventory (30 June 2025): 1.7 million tons (31 March 2025: 1.4 million tons)
- In-process stock (30 June 2025): 1.3 million tons (31 March 2025: 1.3 million tons)
- NMDC steel sales Q1: 0.37 million tons, revenue ~INR1,800 crores
- Coking coal inventory: 25–30 days at ports, ~5 days at plants
- Full-year sales volume guidance: 18.5 million tons (SAIL products only)
- IISCO expansion capex estimate: INR36,000 crores over 3–4 years
All figures as stated in the call.
Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.