By Shyam Metalics and Energy, one of India’s prominent metal producers, witnessed a significant surge in its share price, climbing 10% to reach a 52-week high.
This uptick follows the initiation of coverage by international brokerage firm UBS, which has given the stock a bullish “Buy” rating. UBS’s positive outlook on Shyam Metalics is based on the company’s high growth trajectory and its strategic transformation efforts. The global brokerage has set a target price of ₹1,200 per share, suggesting a potential upside of 43% from its current levels.
In Thursday’s trading session, Shyam Metalics opened at ₹810 apiece on the BSE. The stock quickly climbed, touching an intraday high of ₹844.85, before settling slightly lower. The stock’s performance on this day reflects its broader one-year journey, where it has seen its price double from ₹400 to ₹800, signaling strong investor confidence and market momentum.
UBS’s report highlighted several key factors that contributed to its optimistic view of Shyam Metalics. The firm praised the company’s management for its practical and forward-looking strategy, particularly its efforts to advance up the value chain and diversify its product offerings.
By expanding into new sectors such as aluminum and stainless steel, Shyam Metalics is positioning itself for sustained growth and reduced profitability risks through diversification. UBS also noted the company’s ongoing projects, expected to commence operations between FY25 and FY26, which are set to provide clear visibility of strong future earnings.
A crucial aspect of UBS’s analysis is the company’s integrated operations, which the brokerage believes are not yet fully appreciated by the market. Shyam Metalics sources 75% of its raw materials internally and meets 80% of its power requirements through captive generation.
This level of integration not only enhances operational efficiency but also insulates the company from external supply chain disruptions, giving it a competitive edge in the industry. UBS’s report emphasized that these strengths, coupled with the company’s ability to successfully enter new business areas, make it a compelling investment opportunity.
The brokerage’s confidence in Shyam Metalics is further underscored by the company’s ambitious ₹10,000 crore capital expenditure plan for FY22-27. This capex, which will be financed through internal accruals and existing cash reserves, is aimed at various projects and efficiency improvements that are expected to be both margin and Return on Invested Capital (ROIC) accretive.
UBS pointed out that of the planned capex, ₹5,000 crore has already been incurred, though only ₹2,600 crore has been capitalized, with the balance remaining in capital work-in-progress (CWIP). The brokerage estimates that all new projects will come online by FY27, with ₹2,500 crore to be capitalized in FY25 and the remaining ₹4,900 crore spread across FY26 and FY27.
UBS projects that this capital expenditure could generate additional EBITDA of ₹2,600 crore over the next three years, resulting in a compound annual growth rate (CAGR) of 39% for EBITDA and 50% for profit before tax (PBT) between FY24 and FY27. This expected earnings acceleration is a key factor behind UBS’s positive outlook, and it believes that the market has yet to fully price in this potential.
Market analysts have also taken note of the stock’s technical indicators, which suggest that Shyam Metalics is in an uptrend. The stock has recently formed a Higher Top Higher Bottom structure, indicating a continued upward movement.
Ruchit Jain, Lead Research Analyst at 5paisa, highlighted that the 40-day exponential moving average at ₹710 provides strong support for the stock in the near term. He advised traders to adopt a buy-on-dip approach, suggesting that any short-term pullbacks could present attractive entry points for investors looking to capitalize on the stock’s long-term potential.
As UBS’s coverage initiates a new wave of interest in the company, the coming months will be critical in determining whether the company can meet the high expectations set by both the market and its management. With a solid growth plan and a favorable industry outlook, Shyam Metalics appears well-positioned to continue its upward trajector
