- Revenue rose 12% YoY to INR274 bn, outpacing most Indian steel peers.
- EBITDA hit INR22.9 bn, matching estimates but fell 9% QoQ on weaker net sale realization.
- Adjusted PAT slumped 44% QoQ, underscoring rising depreciation and lower ancillary income.
- Motilal Oswal upgrades SAIL to BUY with a target of INR175, assuming 7× EV/EBITDA by Sep‑27.
- Key risk: price volatility and operating cost inflation could erode the upside.
You missed the SAIL earnings surprise at your peril.
While most analysts were glued to headline revenue numbers, the deeper story lies in how SAIL turned a modest price rally into a 12% top‑line jump—yet let margin pressure gnaw at its bottom line. This duality creates a rare window for contrarian investors who can separate the noise from the signal.
Why SAIL’s Revenue Jump Beats Market Expectations
In 3Q FY26, SAIL posted INR274 bn of revenue, a 12% year‑over‑year increase and a 3% quarter‑over‑quarter rise. The growth was driven primarily by volume expansion, as the company shipped more tonnes despite a softer net sale realization (NSR) metric. Volume growth in Indian steel is often a proxy for domestic demand recovery, especially after the pandemic‑induced slowdown. For SAIL, the lift reflects higher consumption in infrastructure projects and a rebound in automotive steel demand.
Comparatively, Tata Steel and JSW Steel posted revenue growth rates of 8% and 9% respectively, lagging SAIL’s pace. This outperformance suggests SAIL is capitalising on its integrated asset base and lower cost structure to capture market share when demand spikes.
How Weak Net Sale Realization Erodes EBITDA Margins
EBITDA came in at INR22.9 bn, aligning with consensus forecasts but slipping 9% QoQ. The EBITDA/t (EBITDA per tonne) figure of INR4,455 mirrored expectations but fell 3% YoY, highlighting the impact of weaker NSR—essentially the average price at which steel is sold after discounts and freight costs.
When NSR drops, the per‑tonne profit margin tightens, even if volumes rise. This dynamic is crucial: a higher top line does not automatically translate into higher earnings if the price per tonne erodes. For SAIL, higher operating costs—primarily raw material (iron ore and coal) price inflation—exacerbated the margin squeeze.
Sector Landscape: Indian Steel’s Price Rally and Competitor Moves
India’s steel prices have rallied roughly 15% over the past six months, driven by supply‑side constraints and robust domestic demand. Tata Steel has responded by accelerating its capacity expansion, while JSW Steel is focusing on higher‑value products like flat steel for automotive applications.
SAIL’s ability to translate price rally into volume growth puts it ahead of peers who are still battling overcapacity. However, the broader sector faces headwinds: raw material logistics, environmental regulations, and potential import duties could all compress margins.
Technical Valuation: 7× EV/EBITDA Target and What It Means
Motilal Oswal’s revised target price of INR175 is derived from a 7× EV/EBITDA multiple applied to the September 2027 earnings estimate. EV (Enterprise Value) incorporates market cap plus debt, minus cash, offering a holistic view of a company’s valuation. An EV/EBITDA multiple of 7× is modest for a capital‑intensive sector, indicating that the market may still be undervaluing SAIL’s cash‑flow generation potential.
For context, Tata Steel trades at roughly 9× EV/EBITDA, while JSW Steel hovers near 8.5×. SAIL’s lower multiple reflects both the recent earnings dip and lingering concerns over cost structure, but it also opens an arbitrage opportunity for investors who believe the company can sustain margin improvements.
Investor Playbook: Bull vs Bear Scenarios for SAIL
Bull Case: Steel prices continue their upward trajectory, NSR improves, and SAIL leverages its integrated supply chain to keep operating costs in check. Margin expansion pushes EBITDA/t back above INR4,600, and the company meets its FY27 earnings outlook. The 7× EV/EBITDA multiple then yields a price target well above INR175, delivering double‑digit returns.
Bear Case: Raw material inflation outpaces price gains, NSR stays weak, and depreciation accelerates due to aging assets. EBITDA/t falls below INR4,200, forcing a revision of FY27 forecasts. The stock could then revert to its pre‑upgrade level, erasing the upside.
Strategic positioning could involve a staggered entry: acquire a modest stake now, set a stop‑loss near INR150, and add on if the price breaks above INR165 on confirmation of margin recovery.
In summary, SAIL’s 3Q FY26 results paint a nuanced picture—robust revenue growth tempered by margin pressure. The upgrade to BUY hinges on a belief that price dynamics and operational efficiencies will converge to unlock value. Savvy investors who understand the sector’s cost drivers and valuation metrics stand to benefit from the potential upside while protecting against downside risks.