SAIL shares get a downgrade from Nuvama with a 25% price target cut on expensive valuations

State-run SAIL was downgraded by brokerage firm Nuvama on Thursday, December 18, with the firm also cutting its price target on the metal stock.

Nuvama downgraded SAIL to "reduce" from its earlier rating of "hold" and cut its price target by 25% to ₹106 from ₹141 earlier.

Based on Wednesday's closing price, the revised price target implies a potential downside of 18%.

Nuvama has cut SAIL's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimates by 17%, 13% and 13% respectively for financial year 2026, 2027 and 2028 to factor in the lower steel prices.

The brokerage expects SAIL's EBITDA to decline by 30% in the December quarter on a sequential basis, while its EBITDA per tonne may decline by ₹1,400 compared to the June quarter.

At the current price, shares of SAIL are trading at 6.9 times financial year 2027 and 2028 estimated Enterprise Value to EBITDA, which Nuvama finds expensive.

SAIL is set to begin work on the 4.5 MTPA IISCO expansion, and the resultant capex, according to Nuvama, will increase the company's debt burden further.

Nuvama also cited SAIL's poor return ratio expectations behind the downgrade. It expects the company's Return on Equity (RoE) of 3.2% this year, 6.4% in financial year 2027 and 6.5% in financial year 2028.

14 out of the 30 analysts who have coverage on SAIL have a "sell" rating on the stock. 12 have a "hold" rating, while only four analysts say "buy." The consensus estimates of price targets imply no upside on the stock.

Shares of SAIL are trading 2% lower at ₹127.55. The stock has risen 13% so far in 2025.