Shares of Shyam Metalics and Energy (SMEL) on Thursday jumped 11% to its new all-time high of Rs 844.85 after the global brokerage firm UBS initiated coverage on the stock with a target price of Rs 1,200, indicating a 57% upside potential.
“We value SMEL on 8x EV/EBITDA on the FY26-27E average, in line with peers’ multiples. We believe SMEL deserves this multiple given its shift to value-added products, strong earnings visibility, and lower cyclical risk because of diversified metal products,” said UBS in its report.
UBS feels that the company is on a high growth and transformation journey, moving up the value chain while driving efficiency at every level. SMEL is transforming from a producer of commoditised to value-added products and shifts like these should lead to better margins, lower susceptibility to commodity price movement, and a better return ratio.
Strong earnings acceleration visibility is there and the global brokerage firm believes that the market is not fully appreciating its integrated operations. The company has outlined a Rs 10,000 crore capex plan for FY22-27, to be funded through internal accruals and existing cash. This capex is for multiple projects, products, and efficiency improvement and therefore low risk to earnings in case of any project delays.
In the first quarter of the financial year 2025, the company reported a 37% growth in its profit after tax (PAT) to Rs 276 crore on a year-on-year (YoY) basis. The company’s revenue from operations for the June quarter was reported at Rs 3,612 crore, which was a jump of 8.4% YoY.
The stock has been consistently performing well in the past, giving 178% in the last two years and 75.5% in the last one year. In the current calendar year so far, the stock has increased by 27.3%.
On charts, the stock is well placed above all its significant exponential moving averages and at the 62 level on the Relative Strength Indicator (RSI), which is a mid-range level.
Shyam Metalics and Energy is a prominent integrated steel manufacturer based in West Bengal. The company specializes in producing a variety of steel products, including TMT bars, wire rods, pellets, and sponge iron. It also prioritizes sustainability and conservation in its operations.
The company is amongst the largest producers of ferroalloys in terms of installed capacity in India, as of February 2021.
The article originally appeared on The Economic Times.