ICICI Direct has maintained a BUY recommendation on Steel Authority of India with a 12-month target price of Rs 240, implying an upside potential of nearly 25% from the current market price of Rs 192. The brokerage believes the PSU steel giant is entering a stronger earnings cycle supported by rising domestic steel demand, improving realizations, aggressive operational efficiencies, and a healthier balance sheet. SAIL’s Q4FY26 performance reinforced this bullish narrative as the company delivered a sharp rebound in EBITDA per tonne, substantial debt reduction, and stronger profitability metrics. ICICI Direct also highlighted that India’s infrastructure-led growth cycle and SAIL’s ongoing capacity expansion strategy position the company favorably for multi-year growth.

ICICI Direct Reaffirms BUY Call on SAIL Amid Strengthening Steel Cycle

SAIL continues to emerge as one of the most compelling value plays in India’s steel sector. According to ICICI Direct, the company’s improving earnings trajectory, combined with attractive valuations and aggressive operational improvements, creates a favorable risk-reward equation for long-term investors.

The brokerage has retained its BUY stance while assigning a target valuation based on 6x FY28E EV/EBITDA. Notably, SAIL currently trades at nearly 5x FY28E EV/EBITDA, significantly lower than many domestic steel peers that trade closer to 8x multiples.

This valuation discount becomes increasingly important given the company’s improving profitability profile and declining leverage.

Q4FY26 Earnings Showcase Massive Operational Improvement

SAIL delivered a strong quarterly performance during Q4FY26, signaling that the operational turnaround is gaining momentum.

Consolidated revenue for the quarter stood at Rs 30,813 crore, registering growth of nearly 13% sequentially. The improvement was primarily driven by stronger steel realizations and a modest rise in sales volumes.

The company reported steel sales volumes of approximately 5.3 million tonnes, up around 4% quarter-on-quarter. More importantly, blended realizations improved substantially due to stronger domestic steel pricing trends.

One of the biggest highlights of the quarter was the dramatic improvement in operating profitability.

The steep jump in EBITDA per tonne was among the strongest seen across Indian steel producers during the quarter.

Higher Steel Prices Fuel Margin Expansion

A major contributor to SAIL’s improved profitability was the sharp rise in domestic steel realizations.

Management indicated that blended net sales realization during Q4FY26 stood near Rs 52,000 per tonne. However, realizations improved even further during April and May 2026, touching approximately Rs 57,000 per tonne.

The improvement was broad-based across both flat and long steel products.

Long product realizations climbed toward Rs 57,800 per tonne, while flat steel realizations approached Rs 56,700 per tonne during the early part of FY27.

This upward pricing momentum is particularly important because it coincides with strong domestic infrastructure demand and relatively stable steel consumption growth across construction, railways, and manufacturing sectors.

Operational Efficiency Drive Continues to Deliver Results

Beyond stronger pricing, SAIL’s management has aggressively focused on cost optimization initiatives.

The company implemented several operational efficiency measures during Q4FY26, including:

• Higher PCI injection rates
• Improved oxygen enrichment in blast furnaces
• Better iron ore utilization
• Ramp-up of larger blast furnaces
• Closure of smaller inefficient furnaces
• Fuel substitution from LPG to PNG

These measures helped lower production costs materially.

Management also highlighted that coke consumption rates have already been reduced by nearly 20 kg over the last two years, with another 20 kg reduction target planned for FY27.

This operational discipline is beginning to structurally improve SAIL’s cost competitiveness.

Debt Reduction Strengthens Balance Sheet Significantly

Another major positive emerging from the quarter was the sharp reduction in debt.

SAIL reduced borrowings by nearly Rs 8,150 crore during FY26, including approximately Rs 3,200 crore reduction during Q4FY26 alone.

As a result, the company’s debt-to-EBITDA ratio improved substantially to approximately 1.8x compared to 2.8x in FY25.

Interest costs also moderated due to lower debt levels.

ICICI Direct believes the strengthening balance sheet significantly improves financial flexibility ahead of SAIL’s next phase of expansion.

Massive Capacity Expansion Plans Reinforce Long-Term Growth Visibility

SAIL is positioning itself aggressively for India’s next steel growth cycle.

India currently consumes approximately 103 kg of steel per capita compared to the global average of around 215 kg. The government is targeting crude steel capacity of 300 million tonnes by FY31 alongside higher infrastructure spending.

To capitalize on this opportunity, SAIL plans to expand crude steel capacity from nearly 21 MTPA to around 35 MTPA by FY31.

Key expansion projects include:

• IISCO Steel Plant: Expansion from 2.5 MTPA to 7 MTPA with capex of Rs 35,000–36,000 crore
• Bhilai Steel Plant: Around Rs 30,000 crore expansion project
• Bokaro Steel Plant: Nearly Rs 18,000 crore capex for capacity enhancement

The company expects new capacities to start commissioning from FY31 onward.

Meanwhile, management guided for FY27 steel sales volume of nearly 22 million tonnes, compared to approximately 20 million tonnes in FY26.

Employee Rationalization Supporting Margin Expansion

SAIL is also benefiting from lower employee expenses as workforce optimization gathers pace.

Employee strength declined from around 53,159 employees in April 2025 to nearly 49,752 employees by April 2026.

Management expects annual workforce reduction of approximately 3,000–3,500 employees over the next two years through retirements and voluntary retirement schemes.

This reduction has already started reflecting in lower employee costs and improved operating leverage.

Financial Outlook Remains Strong for FY27 and FY28

ICICI Direct expects SAIL’s earnings profile to improve sharply over the next two financial years.

The brokerage estimates EBITDA to rise from approximately Rs 12,000 crore in FY26 to Rs 20,568 crore by FY28.

Similarly, net profit is projected to surge from Rs 3,373 crore in FY26 to over Rs 10,000 crore by FY28.

The brokerage expects PAT to grow at a remarkable CAGR of nearly 73% between FY26 and FY28.

Risks Investors Should Monitor

Despite the bullish outlook, ICICI Direct highlighted a few key risks investors should closely watch.

These include:

• Sharp decline in domestic steel prices
• Higher-than-expected coking coal costs
• Execution delays in expansion projects
• Potential capex overruns impacting balance sheet strength

The brokerage also noted that wage revision uncertainty beyond January 2027 could influence future cost structures.

Investment View

ICICI Direct believes SAIL is entering a favorable phase where improving steel demand, higher realizations, cost optimization, and debt reduction are simultaneously supporting earnings growth.

With valuations still trading at a discount relative to peers, the brokerage sees substantial upside potential if India’s infrastructure and manufacturing momentum remains intact.

For long-term investors seeking exposure to India’s steel cycle, SAIL appears positioned as one of the stronger PSU opportunities currently available in the domestic metals space.