Shyam Metalics share gains 3% on 5-yr growth plans in steel, aluminium biz
Source: Business Standard
Shyam Metalics and Energy shares soared as much as 3 per cent on Monday, September 9, logging an intraday high of Rs 818 per share. Though, at around 2:22 PM, the stock pared some gains and was up 2.1 per cent or Rs 16.65 at Rs 810.9. By comparison, the BSE Sensex’s rose 206.39 points to 81,390.32.
The stock price climbed after the company’s management on Monday informed investors about its growth plans in its businesses of aluminium and stainless-steel products.
“The successful foray into new businesses (Aluminium and stainless-steel products) showcases our execution capabilities, multiple new projects commencing operations in FY25/26 provide strong earnings visibility, while it mitigates fluctuating profitability risk through diversification,” the company’s exchange filing read.
Further, the company’s management said that it has a debt policy of keeping a maximum exposure of 0.5 times at any point in time to ensure the sustainability and competitiveness of the company across cycles and time horizons.
“Even at the peak of the capex cycle we have been cash positive and presently have a Rs 2,000 crore cash surplus as of now,” the management said.
Per the filing, Shyam Metalics has a unique defined business model in the metal industry and sources around 80 per cent of the power required from captive power plants.
Additionally, compared to the average grid power cost of Rs. 5-6 per kWh, Shyam Metalics’ cost of power per unit is Rs. 2.36/kWh which ensures cushion and delta through cost efficiency.
Their vision for the next 5 years includes growth of 4.3 folds over the next 5 years in the Stainless Steel business from the current 1.5 lakh tons to 6.5 lakh tons through investments in both forward and backward greenfield facilities
Secondly, in the aluminium segment, it expects to grow 1.8 folds over the next 5 years from the current 24,000 tons per annum to increase to 42,000 tons per annum through investments in both forward and backward greenfield facilities
Thirdly, in carbon steel, it aims to grow 1.8 fold over the next 5 years in the new product areas like colour coated sheets, structural and ductile iron pipes.
Lastly, the company plans incremental capacities in captive power plants from 386 MW to 706 MW, a 1.8x growth over the next five years.
Recently, UBS had initiated coverage on Shyam Metalics with a ‘Buy’ rating keeping the target at Rs 1,200 per share for 12 months.
As per the brokerage, Shyam Metalics is upping its game by diversifying products and backward integration to capture efficiencies.
UBS said that the market is not fully appreciating Shyam Metalics’ integrated operations such as internal sourcing 75 percent of raw materials, 80 per cent of required captive power, and the ability to venture into new businesses.
In the past one year, shares of Shyam Metalics have given returns of 69.8 per cent against BSE Sensex’s rise of 21.8 per cent.
First Published: Sep 09 2024 | 3:00 PM IST
