Buy SAIL - TP Rs.100 - Geojit BNP Paribas Financial Services

- SAIL has been rated to buy with a target price of Rs.100. The scrip is currently quoted in the range of Rs.87.

- The company's ongoing capacity expansion plans, integration of iron ore and coking coal and gradual reduction of workforce bode well for top-line growth.

- However, project execution remains the single biggest risk for the company. The company's improving operational efficiency will be a key differentiator amid a grim outlook for the steel sector.

- The stock has been de-rated due to continued project execution delays and it seems that the latest plans announced in 2QFY13 may see further delays.

- It appears that rally in steel prices is unlikely to sustain and a correction is expected in 2Q13.

- The stock has limited catalysts for the near term. Faster execution and global demand growth could trigger an earlier re-rating.

- Operating efficiency would improve through FY15 as unit staff cost declines, volumes and value added products increase.

- However, inefficient execution in a weak steel cycle dampens the optimism in the near term.

Source : Equity Bulls

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