The share price of Shyam Metalics and Energy experienced a 10% increase, hitting a 52-week high, after the international brokerage UBS began covering the company. Citing the company’s strong growth and transformation journey, UBS assigned a Buy rating, with a target price of ₹1,200 per share, indicating a potential 43% upside. On Thursday, the share price of Shyam Metalics opened at ₹810 apiece on the BSE. The stock experienced an intraday high of ₹844.85, as well as an intraday low of ₹805.15, all within a year.
UBS Report
According to UBS’s analysis, the management stands out for its realistic approach of moving up the value chain, diversifying the product/metal offering, and integrating backward to increase efficiency.
With multiple upcoming projects beginning operations in FY25/26 and providing clear vision of good earnings while lowering profitability risk through diversification, the company’s successful foray into new sectors (aluminum and stainless steel products) illustrates its capacity to carry out plans.
Capital Expenditure Plan
Its integrated operations, which include captive power (80% of requirement), internal sourcing for 75% of raw materials, and the capacity to enter new markets, are not yet completely appreciated by the market. According to the brokerage, the business has suggested a ₹10,000 crore capital expenditure plan for FY22–27, which will be funded by current cash and internal accruals. By distributing this capital expenditure across a range of initiatives, goods, and productivity enhancements, the profits risk associated with project delays is reduced.
More significantly, the analysis shows that capex is ROIC-accretive and margin-accretive. Just ₹2,600 crore of the ₹5,000 crore in projected capital expenditures has been capitalized; the remaining amount is in CWIP. Every new project will be operational by FY27, with a capitalization of Rs. 25 billion in FY25 and the remaining ₹4,900 crore in FY26 and FY27. In three years, this outlay could produce an additional ₹2,600 crore in EBITDA, translating into EBITDA/PBT CAGRs of 39%/50% in FY24–27.
