BUY FOR TARGET OF 350,400,430 plus in short term. LTP 310.
1. Strong Financials
2. Good Net Cash Flow
3. High EPS growth
4. Low Debt
5. Zero Promoters Pledge
6. Rising Net Profit Margin
7. Increasing Revenue
8. Good Shareholding Pattern
Company have the potential to touch 500 very early and can also become multibagger.
Not a recommendation
*Shyam Metalics* (Fast-growing, well-run steel player, BUY, TP Rs514): Shyam Metalics & Energy (SMEL), a diversified player in the steel supply chain, is poised to benefit over the next few years, from capacity growing 1.5-2x of FY21 levels. Strong focus on cost is backed by plants in eastern India, well-sorted logistics and dependence on low-cost captive power for ~80% of its needs. Hence, while SMEL is exposed to commodities for inputs and end products, it has posted healthy margins, which should endure going ahead. Net-cash balance sheet and healthy return-ratios highlight the conservativeness, which is key to a cyclical business. We initiate coverage on SMEL with BUY & TP of Rs514.
FORWARDED AS RECEIVED, JUST FOR STUDY PURPOSE ONLY!
*👉SHYAM METALLIC* – COMPELLING VALUATION WITHIN THE METAL SPACE, STOCK IGNORED IN RECENT METAL RALLY.
CMP - INR 340-350 /Share
Mcap – INR 8885 aprox crore
Net Cash- INR 1,000 crore
TTM EBITDA- INR 2,560 crore
TTM PAT- INR 1,680 crore
TTM EV/EBITDA- 2.5x
*Shyam Metalics and Energy Limited (SMEL) offers a unique play in the Indian metals space, with a combination of a) doubling of capacity in medium term and b) a strong near-zero debt balance sheet*- Shyam metallic has a 0.9 MT of long steel capacity which is expanding to nearly 2 MT by December 2022.
Current net cash on BS is INR 1,000 crore which will increase despite the ongoing capex due to healthy internal accruals.
Presence in longs value chain - SMEL’s presence in the longs value chain allows it the flexibility in revenue mix depending on prevailing market condition to optimize profits by selling a) intermediates like Iron pellets, sponge iron, billets; b) finished products such as TMT, structural products, wire rods, pipes and c) ferro alloy - *Shyam metallic has an integrated capacity with pellets of 3.6 MT, Sponge Iron of 2 MT, Billet of 0.9 MT & Long steel of 0.9 MT*
Billet & Long steel will expand from 0.9 MT to 2 MT by December 2022
*Presence in longs value chain, proximity to raw-mat; captive power enables healthy margins:* While Shyam metallic does not have its own iron ore, *it has one of the lowest freight cost to source iron ore due to logistical advantage*. *Additionally it has the lowest Power cost of INR 2.2/Unit (Market rate of INR 5.5/Unit)* *It has a Captive 225 MW Power plant (the power plant itself enables it to save INR 400-500 crore annually)*.
*Insulated from rising coking coal prices* Given Shyam’s presence in long steel, it has minimal requirement of coking coal. *Shyam’s annual requirement of coal is around 2 MT, and 45% of this it has a long term FSA tie up with coal India. Rest is sources via imports and E-auction route* Given the rise in coal prices *Shyam’s 45% FSA will help insulate impact on its margins*
*Lowest Cost Ferro- Alloy player*- The company is one of the largest producers of ferro alloys in terms of installed capacity in India at 2 lac ton, and given its proximity to RMs and low power costs, it is the lowest cost producer.
1. Convertor business model with presence across integrated manufacturing
2. Diversified revenue profile- 25% Ferro Alloys, 50% Long steel, 25% Pellet & Sponge Iron
3. The Company’s track record of executing cost efficient expansion augurs well for return ratios - RoE / RoCE (23% / 20%)
4. Net Cash BS with INR 1,000 crore+ Cash
1. 20% business from exports- Very healthy demand outlook
2. *Recent increase in product prices- Pellet up INR 2,000/Ton, Sponge Iron up INR 5,000/Ton & Long steel up INR 10,000/Ton*
3. Completion of Long steel expansion by December 2022 to help in growth in FY24E.
1. Shyam externally sells nearly 1.7-2 MT Pellet- *Pellet has a EBITDA margin of INR 1,500-2,000/Ton- which gives Shyam an EBITDA of INR 350-400 crore (Spot margins could be much higher)*
2. Shyam externally sells nearly 0.7-0.8 MT Sponge Iron- *Sponge Iron has EBITDA margin of nearly INR 5,00/Ton- which gives Shyam AN EBITDA of INR 350-400 crore (Spot margins could be much higher)*
3. Shyam externally sells about 0.9 MT of long steel- *Long steel current EBITDA margins are about INR 12,000/Ton- this gives Shyam an EBITDA INR 1,100 crore*
4. Shyam externally sell about INR 0.15 MT of Ferro Alloys- *Ferro Alloys spot EBITDA margins are about INR 35,000/Ton- this gives Shyam an EBTITDA of INR 500 crore*
5. *Total EBITDA potential is about INR 2,500 crore*
*While current margins definitely would be unsustainable- Shyam’s diversified business model, dependence on Outside RMs and Completion of 1.1 MT of Long steel capacity (Long steel capacity expansion could result in INR 1,100 crore EBITDA at spot rates) will limit the downside in FY24E*
*Net Cash balance currently is about INR 1,000 crore which should increase to INR 1,500 crore despite about INR 1,200 crore of capex in 2022*
Not any buy or sale recommendation)
*Stocks in News*
One 97 Communications (Paytm): Munish Ravinder Varma resigned as non-executive, non-independent director of the company due to personal commitments and other pre-occupations.
Infibeam Avenues: The board has approved the appointment of Sunil Bhagat as Chief Financial Officer of the company, in place of Hiren Padhya.
Zomato: The food delivery giant acquired a 16.66 percent stake in Mukunda Foods Private Limited, a food robotics company, for cash consideration of $5 million. The board also approved a loan of up to $150 million to Grofers India in one or more tranches. The loan to Grofers is in line with its stated intent of investing up to $400 million cash in quick commerce in India over the next 2 years.
EKI Energy Services: The firm is in advanced discussions with some of the European oil and gas majors, to launch an initiative to supply free improved cook stoves to rural households to reduce carbon footprint and generate carbon offsets.
Shyam Metalics and Energy: The company announced a fresh round of Rs 990 crore capital expenditure plans to further expand the capacity by 2.85 MTPA. This capital expenditure will be over and above the ongoing capital expenditure expansion of Rs 3,000 crore.
Genus Paper & Boards: The company has successfully commenced production of duplex paper from one of the production lines at a new unit in Muzaffarnagar, Uttar Pradesh. The Muzaffarnagar unit has manufacturing facilities for the production of kraft paper and duplex paper.
ITC: The company has acquired 1,040 compulsorily convertible preference shares of Rs 10 each of Mother Sparsh Baby Care. With this, its shareholding in Mother Sparsh stands at 16 percent.
#PAYTM #INFIBEAM #ZOMATO #ITC #SHYAMMETL
Ferro Silicon prices up 30% in a week, doubled in 1 month
Silico-manganese prices up 47% in last 1 month
Shyam Metal, Maithan Alloy have largest silicon capacity in India
SHYAM METAL, MAITHAN ALLOYS IN FOCUS: PRICE SKYROCKET
ALLOY SHORTAGE IN CHINA
Spain, China factory shut down seen in Ferro silicon
Factory shutdown due to power shortages in China, Parts of EU
Europe Ferro Silicon prices highest since 1997 levels
#SHYAMMETL #IMFA #MAITHANALL
Please focus on following today and if they meet your evaluation criteria you can decide to trade
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