Looking ahead, we believe SAIL would report steady improvement on operational front amid improved outlook for global steel market led by increase in demand and supply measures in China. Despite SAIL’s modernisation plan and expected higher volume, going forward, we believe that it needs to continue effective cost cutting measures to be able to back in the black.
Notably, the stock has run-up sharply in recent times. At CMP, the stock trades at an expensive valuation of 8.3x FY19E EV/EBITDA. We downgrade our recommendation on the stock to REDUCE from HOLD with an unrevised Target Price of Rs51.
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