SMEL Stock Price: ICICI Securities has ‘buy’ call on Shyam Metalics and Energy with a target price of Rs 400. The current market price of Shyam Metalics and Energy is Rs 346.40 on the NSE. The time period given by the analyst is one year when Shyam Metalics and Energy Ltd. price can reach a defined target. The stock has risen 9.67 per cent in five days on the NSE and has risen 7.10 per cent in the previous month. On a year-to-date (YTD) basis the stock is up by 2.14 per cent but is down by -7.91 per cent in past 1 year.
The newly listed company is a major integrated metal manufacturing firm established in India, with a specialisation in long steel products and ferro alloys, mostly in West Bengal and Odisha. “Key drivers for Shyam Metalics are mini mill configuration allows for close cost monitoring, capex optimization as some of the expensive EPC contracts can be avoided, conservative capital structure holds the company in good stead through cycles and tightly controlled cost structure and low capex intensity allow for increased return ratios through cycle,” the brokerage note stated. Though, high raw material (RM) costs is a key interim risk to margins.
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Investment Rationale
The company’s focus on continuous efficiency improvements, improved productivity and cost rationalisation has enabled it to deliver consistent and strong financial and operational performance. The company has a relatively better financial strength as compared to other companies operating in the long and intermediary steel sector, it highlighted. As per the brokerage “Shyam Metalics and Energy Ltd (SMEL) has announced additional capex of ~Rs9.9bn over and above the existing committed capex of ~Rs30bn to be incurred over 3-4 years. The additional capex would be incurred to i) increase its pellet plant capacity by ~2.4mtpa (~1.2mtpa each at Jamuria and Sambalpur plant), ii) set up a coke oven plant with a capacity of ~0.45mtpa, and iii) double captive railway siding capacities.”ICICI Securities has said “The breakup of the capex is i) Rs3.6bn for pellet plant, ii) Rs4.5bn into coke oven plant and iii) Rs1.8bn for railway sidings. The capex will be funded through internal accruals. Further, the aluminum foil plant of ~40,000tpa capacity has also been commissioned in Mar’22. The pellet plant and coke oven plant are expected to be operational by Sep’23, while the rail sidings are expected to commission by Mar’23.FinancialsFor the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 2594.37 Crore, up 3.16 per cent from last quarter Total Income of Rs 2515.02 Crore and up 51.97 per cent from last year same quarter Total Income of Rs 1707.17 Crore. Company reported net profit after tax of Rs 422.60 Crore in the latest quarter.Promoter/FII HoldingsPromoters held 88.35 per cent stake in the company as of 31-Dec-2021, while FIIs owned 0.98 per cent, DIIs 2.69 per cent.
