Lloyds Metals & Energy shares rise 9.3% to new record high on solid Q1 numbers, up 9300% in 5 years

Shares of Lloyds Metals & Energy surged 9.3% during today's intraday session, reaching a new high of ₹78 each, as investors reacted positively to the company's June quarter results. Lloyds Metals & Energy specializes in manufacturing sponge iron (DRI), power generation, and iron ore mining, and is the largest coal-based DRI manufacturer in Maharashtra.

For the quarter ending June, the company reported its strongest quarterly performance ever, both operationally and financially. Revenue for Q1 FY25 increased by 23% year-on-year to ₹24,231 million, driven by higher volumes of sponge iron and iron ore. EBITDA also rose in line with revenue, up 32% year-on-year in Q1 FY25.

The company's net profit reached ₹5,574 million, a 38.2% increase from ₹4,033 million in the previous year. Revenue from pellet trading saw a significant jump to ₹2,128 million during the June quarter.

Iron ore production for Q1FY25 was 4 million tonnes, with dispatches at 3.6 million tonnes. Realization for iron ore stood at ₹5,710, up 7% year-on-year. EBITDA per tonne was ₹1,848, reflecting a 23% year-on-year increase. Sponge iron volumes also showed growth both year-on-year and quarter-on-quarter.

The DRI segment reported a 16% year-on-year increase in production, totaling 76,704 tonnes. Realizations in this segment remained relatively flat compared to the previous year. The power segment also demonstrated consistent performance, with a 5% increase in sales year-on-year for Q1 FY25.

According to the company's Q1 FY25 investor presentation, it has invested INR 16,900 million in capital expenditures (capex) for FY24 and INR 5,984 million in Q1 FY25. The company maintains a debt-free balance sheet and is funding its capex through accruals.

Meanwhile, the company's shares over the last three years have generated a phenomenal return of 9300%, moving from ₹9 apiece to ₹785.

Strategic Positioning

According to estimates, the country's steel production is expected to reach 300 million tonnes over the next seven years, driven by rising demand across various industries. Achieving this target will necessitate an increase in iron ore supply, exceeding the current domestic production of 255 million tonnes.

In 2023–24, finished steel production reached 138.5 million tonnes, marking a 12.4% increase from the previous year. To meet the 300 million tonnes capacity goal, an annual growth rate of 12% is required.

LMEL has secured a significant 30-year extension for its captive iron ore mines at Surjagarh. The lease, initially set to end in 2027, has been extended to 2057. This extension guarantees continuous access to iron ore, benefiting both LMEL's internal use and external sales.

The company is investing in cutting-edge steel manufacturing facilities and advancing iron ore mining and beneficiation processes. These initiatives align with the nation's steel production targets and aim to bolster economic growth in Chandrapur and Gadchiroli, Maharashtra.

Strategically positioned in the heart of India, LMEL's iron ore mines are centrally located relative to numerous steel plants across the country. Leveraging this geographic advantage, LMEL effectively markets its surplus iron ore, generating additional income with higher profit margins.

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