Shyam Metalics and Energy shares zoom 10% to record high; here’s why

Shares of Shyam Metalics and Energy Ltd hit a record high today after the firm announced its sales for the month of July. Shyam Metalics and Energy stock touched an all-time high of Rs 464.50, rising 10% against the previous close of Rs Rs 422.30 on BSE. The metal stock has gained 49.54% in one year and risen 38% since the beginning of this year.  

At 12:22 pm, the Shyam Metalics stock was trading 6.80% higher at Rs 451 on BSE. Market cap of the firm rose to Rs 11,504 crore. The stock opened higher at Rs 424.95 on BSE. Total 4.31 lakh shares changed hands amounting to a turnover of Rs 19.70 crore on BSE.    

In terms of technicals, the relative strength index (RSI) of Shyam Metalics stands at 79.7, indicating the stock is overbought. The stock has a one-year beta of 0.7, indicating low volatility during the period.  Shyam Metalics stock is trading higher than the 5 day. 20 day, 50 day, 100 day and 200 day averages.   

In July, the company logged an increase of 37.2% in sale volume of sponge iron as compared to the previous month wherein realizations have been down by 4.9% on the back of lower raw material costs. 

In case of billets, there was a decrease in realization on sale of billets which fell 4.7% as compared to the previous month. The volume too slipped 10.6% as compared to the previous month owing to fresh facilities coming up in finished steel. 

The realisations fell 4.3% in line with the overall market in case of long steel as compared to the previous month. However, the volumes were up by 5.3% on a month-on-month basis and volumes zoomed 54.7% yoy basis, clearly showing a shift towards value added products. 

SBI Securities is bullish on the stock with a target of Rs 535.   

“The company is the sixth-largest integrated domestic steel producer, 4th largest sponge iron player, largest ferro alloys producer and leading player in terms of pellet capacity with combined FY23 intermediate and finished steel production capacity of 12.73 mn tonnes. The company sources 74% of its power requirement captively with an aggregate installed capacity of 267 MW.  

Here’s a look at the triggers for the likely rally according to the brokerage.   

1. Brownfield expansion in the existing facility of 12.73mnt to 14.45 mnt by 2025 and greenfield expansion for coated sheets.   

2.  FY23-FY25E Sales/EBITDA/PAT CAGR of 30.0%/40.4%/40.8% to Rs 213 bn/Rs 29 bn/Rs 17 bn.   

 3. The stock is trading at FY24E/FY25E EV/EBITDA of 4.3x/3.3x  

Shyam Metalics and Energy Limited (SMEL) reported a 43 per cent fall in consolidated net profit at Rs 235 crore in the April-June quarter of 2023-24, dragged by higher expenses. It had posted a net profit of Rs 414 crore in the corresponding period of 2022-23. 

Total income, however, rose to Rs 3,339.84 crore in Q1 from Rs 3,245.13 crore in the year-ago quarter. 

Expenses rose to Rs 2,901.96 crore in the first quarter of FY24 as against Rs 2,616.60 crore a year ago.  

Shyam Metalics and Energy Ltd is a metal producing company. It is engaged in the business of manufacturing and selling of ferro alloys, iron and steel, products and power generation. Its product portfolio includes iron pellets, sponge iron, billets, thermo-mechanically treated (TMT) bars, structural steel, wire rods, power, ferro alloys, and aluminum.    

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