Buy Shyam Metalics and Energy, target price Rs 400: ICICI Securities

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 310.15. Time period given by analyst is one year when Shyam Metalics and Energy Ltd. price can reach defined target.

Shyam Metalics and Energy Ltd., incorporated in the year 2002, is a Small Cap company (having a market cap of Rs 7913.88 Crore) operating in General sector.

Shyam Metalics and Energy Ltd. key Products/Revenue Segments include Steel, Sale of services, Export Incentives, Power, Miscellaneous, Other Operating Revenue for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 2594.37 Crore, up 3.16 % from last quarter Total Income of Rs 2515.02 Crore and up 51.97 % from last year same quarter Total Income of Rs 1707.17 Crore. Company reported net profit after tax of Rs 422.60 Crore in latest quarter.

Investment Rationale
The brokerage initiates coverage on Shyam Metalics and Energy Ltd (SMEL) with a BUY rating and a target price of Rs400/share based on 1.17x FY24E P/B (which more than adequately discounts for forecasted 18%+ through cycle RoE). SMEL is a sponge based long product producer (with coal linkages from MCL/CCL, unintegrated in iron ore which the company procures from Odisha) with sponge iron capacity of ~2.11mtpa as on March 10, 2022. It has pellet capacity of2.4mtpa, with downstream billet and TMT/structural capacity of 892kte and~820kte, respectively. Key drivers for SMEL are i) mini mill configuration allows for close cost monitoring, ii) capex optimization as some of the expensive EPC contracts can be avoided, iii) conservative capital structure holds the company in good stead through cycles and iv) tightly controlled cost structure and low capex intensity allow for increased return ratios through cycle. High RM costs is a key interim risk to margins.


Promoter/FII Holdings
Promoters 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.