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ICICI Securities Report
Shyam Metalics and Energy Ltd. reported better-than-expected earnings in Q1 FY23 led by better-than-expected blended realisations (increased 8% QoQ) and higher volumes. Gross margin/tonne declined marginally by ~Rs 330/tonne QoQ while Ebitda/tonne declined ~Rs 1,940/tonne QoQ.
Increase in volumes – expected to increase to ~2.1 million tonne in FY23E (up 35% YoY) along with cost improvement projects (captive power, railway siding) will help support earnings.
Shyam Metalics has declared an interim dividend of Rs 1.8/share in Q1 FY23. Conservative capital structure with net cash of ~Rs 4.8 billion at FY22-end and growth capex funded through internal accruals will allow improvement in shareholder returns, in our view (payout as well as % of free cash flow returned to shareholders).
We expect ~Rs 11 billion per annum of capex over FY23/24E given Rs 24 billion of the envisaged Rs 39.5 billion capex will be incurred over the next two-three years.
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