The mid-sized company Shyam Metaliks & Energy Ltd. closed on Thursday with a market valuation of Rs. 7,435 crores. Shyam Metallics, a leading integrated metals manufacturer headquartered in India, specializes in long steel products and ferroalloys. It is a top integrated metal-producing corporation with operations mostly in West Bengal and Odisha, India.
Brokerage firm ICICI Securities is looking at 96% upside on Shyam Metaliks & Energy from its current market price targeting all-time higher levels. Behind the 570 multi-fold and multi-dimensional development potential.
ICICI Sec said in a note that it “views Shyam Metaliks & Energy’s (SMEL) share price on the upside from CMP: 1) ramp-up and stabilization of existing capacities; 2) recent stainless steel and color- entry into coated steel, which is expected to generate additional EBITDA of Rs 6 billion by FY25E; 3) earnings contribution from Ramsarup Industries; and 4) niche capabilities (in aluminum foil and low-carbon ferrochrome), which will drive earnings- There is potential for growth. Consequently, we expect EBITDA to grow 2X by FY 2025E as compared to FY 2023E, even on our assumption of declining commodity prices.
“Going forward, we expect margins to improve further due to metallurgical integration benefits with ferrochrome with stainless steel and finished steel as the diversified product mix is evened out. Besides, low leverage, consistent dividend payouts and high returns (due to low capex intensity) compared to peers are additional sweetness,” the brokerage further added.
“Taking cognizance of earnings from new projects and the capacity roll-out plan, we grow our FY24E EBITDA by 29%, while reducing our FY23E EBITDA by slightly less than 4%. We present FY25E financials at this stage and reduce our valuation multiple to 4.5x (previously 5x) due to the accretive earnings accrual on upcoming capabilities and their timely ramp-up. As we roll over to FY25E EBITDA (25% discount to major steel peers), our revised TP of Rs 570/share (earlier Rs 425) works out to 4.5x,” the ICICI Sec note added.
In terms of valuations, research analysts at ICICI Securities said, “We find SMEL best positioned among steel companies as a result of our attractive growth prospects. At valuations, the stock is trading at 2.4x FY25E EBITDA – peers among the lowest. We recommend SMEL as a top pick among steel players under our coverage with a revised target price of Rs570 (earlier Rs425) at 4.5x FY25E EBITDA. In the near term, we look at the key stock performance We see the need to bring down promoters’ stake to 75% (currently 88.35%) by Jun’24 as a risk taker.
Shyam Metaliks & Energy shares closed on NSE 289.95 each level, down 0.74% from the previous close 292.10. The stock touched a 52-week high 371.05 (12-Apr-2022) and at 52-week low at 254.55 (29-Mar-2023). Shyam Metaliks & Energy records all time high 461.15 in July 2021 and all time low 254.55 in March 2023.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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