Shyam Metalics shares: Why the iron & steel stock can rise 80% in a year

Shares of Shyam Metalics and Energy Ltd are in focus after ICICI Securities mentioned the stock as its top pick in the metal sector. The brokerage maintained its target price of Rs 570 for the iron and steel stock, implying an upside of 80% against the close of Rs 293.25 on June 5, 2023 on BSE. The brokerage came out with the metals and mining report on June 6. Since then, the stock has gained 8%.

On June 7, the stock touched an intraday high of Rs 316.75, against the previous close of Rs 311.65 on BSE. Later, it closed 1.22% higher at Rs 315.45 on BSE. The stock has been gaining for the last two days.

Shyam Metalics stock is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The metal stock has gained 1.37% in one year and risen 0.62% since the beginning of this year.

Market cap of the firm rose to Rs 8046 crore. The stock opened higher at Rs 311.65 on BSE today. Total 0.55 lakh shares changed hands amounting to a turnover of Rs 1.72 crore on BSE.

ICICI Securities said, "We stay upbeat on SMEL's prospects largely due to new capacities getting commissioned by end-Jun'23. As a result, at this stage, we don't see a risk to our FY24E EBITDA of Rs25.6bn (up 73% YoY). Maintain BUY on SMEL with an unchanged TP of Rs 570."

In terms of technicals, the relative strength index (RSI) of Shyam Metalics stands at 68.6, signaling the stock is trading neither in oversold nor in the overbought zones. The stock has a one-year beta of 0.8, indicating low volatility during the period. Shyam Metalics shares are trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Referring to the Q4 earnings, the brokerage said, "Performance was slightly lower than estimates. EBITDA rebounded 86% QoQ to Rs 410 crore. Revenue contribution from finished steel products surged to an all-time high level of 53.5%.Pellet and sponge iron volume rose QoQ as capacities commissioned in December 2022 ramped up."

Shyam Metalics reported a 39.38% fall in consolidated profit to Rs 261.18 crore for the fourth quarter ended March 2023 against a net profit of Rs 430.86 crore in the corresponding quarter of the previous fiscal. The firm reported a 18.36% rise in revenue to Rs 3380 crore in the March 2023 quarter against Rs 2856 crore in the March 2022 quarter. EBITDA fell 37.65% to Rs 413 crore in Q4 against Rs 663 crore in the March quarter of 2022.

On an annual basis, net profit slipped 50.27% to Rs 857.60 crore for the fiscal ended March 2023 against Rs 1724.51 crore for the fiscal ended March 2022. However, revenue climbed 21.32% to Rs 12,610 crore in the March 2023 fiscal against Rs 10,393 crore for the fiscal ended March 2022. EBITDA slipped 42.84% to Rs 1485 crore in the last fiscal against Rs 2599 crore in the March 2022 fiscal.

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.