Shares of Shyam Metalics and Energy Ltd rose 11% to a record high on Wednesday after global brokerage UBS initiated coverage on the metal stock with a buy call. The brokerage sees 57% upside to the stock at Rs 1,200 against its previous close. Shyam Metalics stock gained 10.61% to Rs 844.95 against the previous close of Rs 763.80 on BSE.
The metal stock has gained 77% in one year and gained 28.25% since the beginning of this year. Market cap of the firm rose to Rs 22,976 crore. The stock opened higher at Rs 810 on BSE. Total 4.25 lakh shares changed hands amounting to a turnover of Rs 35.06 crore on BSE.
In terms of technicals, the relative strength index (RSI) of Shyam Metalics stands at 61.9, indicating the stock is trading neither in the overbought nor in the oversold zone. The stock has a one-year beta of 1.3, indicating high volatility during the period.
Shyam Metalics shares are trading higher than the 5 day. 10day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.
"We value Shyam Metalics on 8x EV/EBITDA on the FY26-27E average, in line with peers' multiples. We believe Shyam Metalics deserves this multiple given its shift to value-added products, strong earnings visibility and lower cyclical risk because of diversified metal products," said UBS.
“Shyam Metalics management has outlined a Rs 10,000 crore capex plan for FY22-27, of which around Rs 5,000 crore has been incurred to date but only Rs 2600 crore has been capitalised while the balance is in capital work in progress (CWIP). It will be capitalising around Rs 2500 crore of capex in FY25 and Rs 4900 crore in FY26 and FY27. These project capitalisations should contribute to operating profit. Most of this capex is funded through internal accruals and existing cash and so the balance sheet is stress free.”
“We derive confidence from company's recent success in new product categories like aluminium foil and stainless steel. Further, capex is for multiple projects in diversified metals thereby lowering earnings risk in case of a delay in any. We estimate new projects will add additional EBITDA of Rs 2600 crore over FY24-27, resulting in EBITDA/PBT growth of 39%/50% over this period,” said UBS.
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.