Broking House: Angel Rating: Accumulate
Price Target: `182
SAIL reported a second quarter net profit of `1,107 crore — below forecasts. A negative surprise during the quarter was the fall in the realization per tonne of steel, Angel says. SAIL’s management has indicated that the fall was a one time item — because of liquidation of some defective inventory. Compared to the last year, operating margins were lower as raw material costs have increased substantially.
At its current price, SAIL’s stock is trading at 8.6 times the estimated FY11 earnings. Going ahead, Angel Broking sees the firm benefitting from strong domestic demand. Based on these factors, it has kept an ‘accumulate’ rating on the stock, but has cut the price target from the earlier level of `198
Our Recommendation :
Avoid this stock for this year 2011. With the FPO the floating stock increasing there are more investors likely to book profits at every rise ! Utilize steep corrections to buy the share for long term and build a portfolio with a view to hold the stock for 3-5 years horizon for a decent profit.
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