Buy Lloyds Metals and Energy; target of Rs 1570: Anand Rathi

Anand Rathi's research report on Lloyds Metals and Energy

Public hearing and mine inspection for EC enhancement has already been completed and is awaiting a formal response from the MoEF. Environmental public hearing for the EC expansion which completed in Jan’25 received consent from representatives of ~30 villages and the management expects receipt of formal response by end of May'25. As there is a slight delay in EC, the company expects ~1-1.2m tonne of lower iron ore production in FY26. The 85km slurry pipeline between Hedri and the Konsari has been completed and will ramp-up in sync with EC clearance (the company has already started transportation of the material on trial basis). The 0.36m tonnes DRI and 4m tonnes pellet plant are expected to be completed by Jun-Jul’25 and the benefit from these facilities is expected to accrue from Q2FY26 onwards. The company in Dec’24 announced acquisition of Thriveni MDO and the management has planned multiple cost saving initiatives with potential savings of >$2.4b over next decade.

Outlook

We assume Q1FY26 to be an eventful quarter with receipt of EC by end of May’25 along with commissioning of slurry pipeline, pellet and DRI facility. We have increased our FY26/FY27 revenue estimates by 3.5%/2.4% and EBITDA estimates by 1.9%/2.4%. We retain our Buy rating, with a TP of Rs 1,570, FY27e (a sum-of-parts valuation).