SAIL Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Low Profitability

Steel Authority Of India (SAIL) has recently been downgraded to a 'Sell' by MarketsMOJO, a leading financial analysis firm. This decision was based on several factors, including the company's high debt to EBITDA ratio of 3.09 times, indicating a low ability to service debt. Additionally, the company's return on equity (avg) of 9.80% is relatively low, indicating poor profitability per unit of shareholders' funds.
Furthermore, SAIL has shown poor long-term growth, with its operating profit growing at an annual rate of -1.64% over the last 5 years. In fact, the company declared negative results in Jun'2024 after 1 consecutive positive quarters, with PBT LESS OI(Q) at Rs 232.86 crore falling by -75.7% and PAT(Q) at Rs 341.70 crore falling by -63.1%. The company's debt-equity ratio (HY) is also at its highest at 0.64 times.

In terms of technical trends, SAIL's stock has been trading sideways, indicating no clear price momentum. The technical trend has also deteriorated from Mildly Bullish on 19-Sep-24, resulting in a -2.39% return since then.

However, there are some positive aspects to consider. SAIL has an attractive valuation with a ROCE of 6.3 and an enterprise value to capital employed ratio of 0.9. The stock is also currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 30.55%, its profits have risen by 137.7%, resulting in a low PEG ratio of 0.1.

It is worth noting that the majority shareholders of SAIL are the promoters, which may indicate their confidence in the company's future prospects. However, based on the current financial analysis, MarketsMOJO has downgraded SAIL to a 'Sell' and advises investors to proceed with caution.