Shyam Metalics: Up 56% from its IPO price, ICICI Securities sees another sharp rise in the metal stock; here's why
Shyam Metalics and Energy (SMEL), a leading integrated metal producer with an unchanged target price of ₹690 apiece, indicating an upside of 45%. Despite the company's Q2FY24 EBITDA falling short of its estimates, the brokerage expects a ramp-up of DRI-IF route capacity, the recent uptick in prices, and the commencement of stainless-steel capacity at Mittal Corp to aid the company's EBITDA in H2FY24. The brokerage highlighted that the company has a net debt/EBITDA of 0.74x, the best among peers.
Also Read: Metals index on the rise: Which stocks to buy? With the commissioning of the 198 ktpa sponge iron unit at Sambalpur, the entire DRI-IF capex announced on March 22 has been commissioned. Of the balance capex, the brokerage said that the company has incurred more than 50% and 40% for blast furnace and coke oven. Almost 25% of capex for 400ktpa colour coated capacities has been incurred.
The company's H1FY24 capex stands at ₹8.9 billion. The brokerage believes that in the near term, earnings growth is largely expected to be volume-led, coming from the ramp-up of DRI-IF capacity. Over FY25, it expects an additional revenue stream from the stainless steel capacity at Mittal Corp.
Also Read: A bull market is coming: This is how you should prepare for it The brokerage also pointed out that by FY25, Shyam Metalics and Energy will be the only metal company in the world to have revenue streams from carbon steel, stainless steel, and downstream aluminium business. For the September quarter, the company recorded consolidated revenue of ₹2,941 crore, down from ₹3,085.20 crore recorded in Q2FY23. The operating profit during the quarter improved by 26% YoY, while the operating profit margin expanded 200 basis points to 10%.
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