SAIL slumps 6% on widening losses; time to sell?

NEW DELHI: Shares of SAIL plunged 6 per cent in Friday’s trade after the steelmaker reported widening of net loss in June quarter.

The company reported a net loss of Rs 535.52 crore for the quarter against a loss of Rs 248.18 crore in the corresponding quarter last year. Sales degrew 3.11 per cent to Rs 9,082.33 crore compared with Rs 9,373.85 crore in the same quarter last year.

JPMorgan has maintained a neutral rating on the stock after tepid earnings with a target of Rs 55. The brokerage pointed out Ebitda was positive in June quarter for first time in four.

It said SAIL was hit by a perfect storm in FY16 with weak domestic market and rising imports and said it was cautious on issues of stabilisation of expansions and changes in the top-level management. Jefferies has maintained an underperform rating on the stock with a target price of Rs 32.

“ASP, volumes were in line, but lower-than-expected input costs led to higher Ebitda. Debt rose 9 per cent QoQ; volume growth remained muted and FY17 volume missed guidance. Ebitda may slip back potentially to losses in Q2," Jefferies said.

Domestic steel prices could improve in H2 of FY17, but margin pressure is unlikely to ease, it said. JPMorgan said SAIL was most levered to domestic demand recovery given the capacity expansion and huge inventories.