Newly listed metal stock could rally over 30% as brokerage sees upside
Premium- The domestic brokerage house has initiated coverage on the newly listed metal stock with a Buy recommendation
Shares of Shyam Metalics and Energy (SMEL), that got listed in June 2021, has surged about 7% in 2022 (year-to-date) so far. The newly listed stock is down more than 7% since its market debut.
Domestic brokerage and research firm JMFinancial has initiated coverage on the metal stock with a target price of ₹480 per share, implying more than 30% potential upside from current level, on the back of its diverse value chain, and its growth capex which will drive earnings.
“Shyam Metalics offers a unique play in the Indian metals space, with a combination of more than doubling of capacity in medium term and a strong net cash balance sheet. The name also offers the opportunity to look beyond the front run, highly consolidated steel space in India. Presence in longs value chain benefits the company as rebar prices have risen ~16.3k/t CYTD, bridging gap with HRC prices," the brokerage added.
Shyam Metalics announced a fresh capex plan aggregating ₹9.9 billion in addition to the ongoing capex of around ₹30 billion to further improve backward integration at its steel plants. The company plans to add pellet capacity of 1.2 mtpa each at Jamuria and Sambalpur, 450 ktpa coke oven plant to improve yield of blast furnace, and doubling of captive railway lines at both Jamuria and Sambalpur plants along with tippler at each plant.
“Shyam Metalics current capex plan is designed to plug potential gaps in the value chain and will enhance cost efficiencies. Besides, these projects are being funded through internal accruals and are unlikely to stress the balance sheet," the brokerage noted.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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