X

Steel Authority of India Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Steel Authority of India Ltd (SAIL) Q2 FY24 Earnings Concall

  • Financial Performance
    • SAIL registered best ever Q2 results in Q2 FY2024.
    • Crude steel production grew 12% and saleable steel production grew 17% in Q2 FY24.
    • Sales volume grew 13% domestically and total sales turnover grew 13% in Q2 FY24.
    • SAIL returned to profitability with PBT of INR1696 crore and PAT of INR1,241 crore in Q2 FY2024.
    • H1 FY2024 PBT grew over 250% vs last year to INR1898 crore.
  • Outlook
    • Coking coal prices expected to moderate in Q4 FY2024 providing cost relief.
    • Domestic steel consumption outlook remains positive supporting better realizations.
    • Expecting benefits from rail price revision to boost revenues and profits.
    • Coking Coal Prices
    • Expect Q3 imported coal prices to average around INR27,000/tonne.
    • Around 15% of coking coal sourced domestically from BCCL at 12-15% discount to import price.
  • Rail Price Revision Benefits
    • Booked INR1,750 crore in Q2 from FY22 rail price revision to INR85,300/tonne.
    • Currently getting provisional rail price of INR67,500/tonne for FY23 and FY24.
    • Will approach Railways for ad-hoc increase for FY23 and FY24 based on higher costs.
    • Expect additional gains in coming quarters once final FY23 rail price is determined.
    • Will submit FY23 costs to determine final rail price, expect it to exceed provisional price.
  • Semis Sales
    • Semis share of sales now less than 15%.
    • Using external conversion services to convert semis to finished products.
    • Reduced overall semis share to just 8% of sales.
    • Conversion done mainly for long products like TMT bars and structures.
  • Sales Realizations
    • Q2 flat product realization around INR55,000/tonne vs INR51,000 for long products.
    • In October, flat realization was Rs 57,000/tonne and long products Rs 54,000/tonne.
    • Current differential between flat and long products is Rs 3,000 – 4,000/tonne.
  • Capex and Expansion Plans
    • Will start with greenfield expansion of IISCO Steel Plant.
    • Expect to get board approval for IISCO expansion by end of Q3FY24.
    • Asset sweating capex of Rs 15,000-20,000 crores over 4-5 years.
    • Will then go for brownfield expansions at Durgapur and Bokaro.
    • Phasing expansions over 3-4 years to avoid liquidity crisis.
    • Aim to maintain debt-equity ratio of 1:1 during expansion.
    • Asset sweating to increase capacity by 3.5 million tonnes over next 3 years
  • Production Enhancement
    • Plan to sweat existing assets through debottlenecking.
    • Adding casters at Rourkela and Bhilai to increase capacity by 2 million tonnes.
    • Also setting up TMT bar mill at Durgapur to improve product mix.
    • Intermediate mining started at Rowghat, will help secure iron ore.
    • Targeting 3-4 years to get sufficient iron ore material from Rowghat.
  • Volume Growth
    • Volume guidance for FY24 is 19 million tonnes of crude steel production.
    • Debottlenecking to help increase capacity by 2 million tonnes.
    • Debottlenecking to add 1 MT each in FY26 and FY27.
    • Sweating of assets to further increase capacity by 3.5 million tonnes.
    • Volume growth to come in phases starting FY25.
    • FY24 target is 19 MT crude steel production and 18-18.5 MT sales.
  • Domestic Demand Trends
    • Seeing very good domestic demand, reduced inventory by 3 lakh tonnes since Q1.
    • Import pressure building up especially for flat products.
    • Overall imports still small compared to India’s steel production.
    • Expect imports to have some impact but not major.
Related Post