Lloyds Metals And Energy Gets 'Buy' Rating From ICICI Securities As It Initiates Coverage, Sees 35% Upside

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ICICI Securities Report

We initiate coverage on Lloyd Metals and Energy Ltd. with Buy recommendation. Key points:

1. Structural iron ore cost advantage compared to peers;

2. capex of Rs 327 billion for 4.2 million tonnes per annum steel plant likely to be value accretive;

3. various cost initiatives may provide a cumulative benefit of $2.4 billion over the next 10 years;

4. acquisition of Thriveni Earthmovers and Infra Pvt. Ltd. likely to be cost efficient; and

5. superior returns versus peers.

Going ahead, we expect Ebitda/PAT CAGR (FY24-31E) of 35% and RoE/RoCE in excess of 23% (best among steel peers). As the benefits of ongoing capex would be visible only post FY29, we value Lloyds Metals and Energy on DCF-based methodology, resulting in target price of Rs 1,615. Besides, the option value from TEIL acquisition is an extra Rs 320/share, to be realised once the transaction is over.

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