Why Shyam Metalics Could Benefit From Two Trade Restrictions By India

Shares of Shyam Metalics & Energy Ltd. have gained almost 22% in the past one month. This could be on the back of two recent trade restriction announcements that government of India plans to impose on China.

The manufacturer of steel and allied products could not only benefit from the anti dumping duty announced on Chinese aluminium foil, but also the potential 12% safeguard duty on certain steel imports from China and Vietnam.

Over the weekend, India imposed a provisional anti-dumping duty on aluminum foil imports of up to 80 microns in thickness. The duty could be up to $873 per tonne and is for a period of six months.

Shyam Metalics is the second largest manufacturer of aluminium foil in India and is expected to be a key beneficiary of this duty. The company currently has an existing aluminium foil capacity of 26,400 MT and is expanding the capacity by an additional 18,000 MT.

As per UBS the latest duty is expected to generate an additional Ebitda of Rs 100 crore to Rs 125 core over the next two years. Currently, the company's Ebitda per tonne in the segment stands at Rs 35,000 per tonne. The brokerage expects the duty to help increase the company's unit Ebitda by Rs 20,000 per tonne.

As per Systematix Research, the company's aluminium foil segment has the potential to generate 18% Ebitda margin from 11% currently.

Last week, the Directorate General of Trade Remedies, which is the Commerce Ministry's trade investigations arm, also recommended a 12% safeguard duty on steel imports. As per UBS, this is expected to lead to an improvement in the Ebitda per tonne of the colour coated sheets business of Shyam Metalics.

The company's current colour coated sheet capacity stands at 25,000 to 30,000 tonnes, which it plans to double in FY26.