Shyam Metalics share price surges over 10% to touch 52-week high as UBS sees 43% upside

Shyam Metalics and Energy share price saw a 10% surge in share price, reaching a 52-week high, following the initiation of coverage by International brokerage UBS. The global brokerage house has given Shyam Metalics and Energy a Buy rating, citing the company's high growth and transformation journey. UBS has set the target price at ₹1,200 per share, signifying a potential upside of 43%.

On Thursday's session, Shyam Metalics share price opened at ₹810 apiece on BSE, the stock touched an intrday high of ₹844.85, and an intraday low of ₹805.15. Over the course of one year, the Shyam Metalics stock price has doubled from ₹400 to ₹800.

“Shyam Metalics share price has recently formed a Higher Top Higher Bottom structure and is thus in an uptrend. The 40 DEMA at 710 is a good support for the near term. Traders can keep a buy-on-dip approach for this stock,” said Ruchit Jain, Lead Research Analyst at 5paisa.

In its report, UBS mentioned that the management's practical strategy of advancing up the value chain, expanding product/metal variety, and integrating backward to improve efficiency sets it apart. The effective entry into new sectors (aluminium and stainless steel products) demonstrates its ability to carry out plans, with several upcoming projects starting operations in FY25/26 offering clear visibility of strong earnings, all the while reducing profitability risk through diversification.

“We believe the market is not fully appreciating its integrated operations such as internal sourcing (75% of raw materials), captive power (80% of requirement), and the ability to venture into new businesses. We initiate coverage at Buy with a price target ₹1,200, c60% above the current share price,” the global brokerage said.

In its report, UBS mentioned that it has strong visibility of earnings acceleration.

The brokerage stated that the company has proposed a ₹10,000 crore capex plan for FY22-27, which will be financed through internal accruals and existing cash. This capex is allocated for various projects, products, and efficiency improvements, minimising the earnings risk in case of project delays.

“More importantly, our analysis indicates capex is both margin and ROIC-accretive. Of the planned capex, ₹5,000 crore has been incurred but only ₹2,600 crore is capitalised and the balance is in CWIP. We expect all new projects to come on line by FY27 with Rs25bn to be capitalised in FY25 and the balance ₹4,900 crore in FY26 and FY27. We estimate this capex could generate additional EBITDA of ₹2,600 crore in three years resulting in EBITDA/ PBT CAGRs of 39%/50% in FY24-27,” UBS said.

Shyam Metalics, is a prominent producer of integrated metals. The company runs steel manufacturing facilities in Sambalpur, Odisha and Jamuria, West Bengal. Additionally, it has a production plant in Mangalpur, West Bengal.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.