Shyam Metalics shares jump 9%, hit new 52-week high; is more steam left in the stock?

Shares of Shyam Metalics and Energy (SMEL) surged more than 9 per cent to hit their new 52-week high during the early trading session on Wednesday amid the heavy trading volumes and buying across the entire metal pack. The stock continues to remain the top pick of brokerage firms from the metal sector.

Shares of Shyam Metalics and Energy rose over 9 per cent to Rs 347 on Wednesday, commanding a total market capitalization close to Rs 8,800 crore. The iron and steel player had settled at Rs 317.20 on Tuesday. Shares of Shyam Metalics have surged more than 12 per cent in the last one month, while it is up 37 per cent from its 52-week low at Rs 253.05 on March 29.

According to the data from BSE, more than 77,000 shares of Shyam Metalics worth Rs 2.59 crore were traded as of 11.45 am, which is more than triple the two-week average. Likewise, 18.19 lakh equity shares amounting to Rs 61.81 crore exchanged hands on NSE.

Shyam Metalics and Energy reported a more than 39 per cent decline in the net profit at Rs 261.2 crore on a year-on-year (YoY) basis for the fourth quarter that ended March 31, 2023. The steel maker had posted a net profit of Rs 430.9 crore.  In the March quarter, total revenue stood at Rs 3,380.1 crore during the period under review, up 18.3 per cent YoY.

The volume/realisation data of Shyam Metalics and Energy for May 2023 has reinforced our conviction on the company's growth prospects, said ICICI Securities. "We expect lower thermal coal and iron ore costs to aid profitability in Q2FY24. We do not envisage a risk to our FY24E EBITDA of Rs 2,560 crore, it said with a 'buy' and a target price of Rs 570.

"Rebar volume rose despite overall weak demand; volume ramp-up of aluminium foils and LC ferrochrome may aid margins; and implied revenue for May 2023 is up 2 per cent YoY despite sharply lower realisation across all product lines. Going ahead, we expect earnings growth largely on the back of capacity ramp-up," the brokerage added. It sees an upside of 80 per cent on the counter.

"We expect FY24E earnings to be driven by higher volumes and higher gross margins. SMEL’s balance sheet remains strong and future capex will be mainly internally funded. Rolling over to FY25E and valuing SMEL at 4 times EV/EBITDA yields a target price of Rs 439," said Nuvama Institutional Equities, suggesting a buy rating on the stock.