UBS initiates Buy on Shyam Metalics with a 60 percent upside on diversification plans

Shyam Metalics' forey into the aluminium and stainless steel businesses showcases its execution visibility, as per UBS.

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26 Aug, 2025 12:21

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International brokerage UBS has initiated coverage on Shyam Metalics and Energy with a Buy rating, stating that the metals company is on a high growth and transformation journey. The target price issued by UBS is Rs 1,200 per share, indicating an upside of 58 percent.

Among the differentiators, UBS quoted Shyam Metalics management's pragmatic approach to move up the value chain, diversifying products/metals and backward integration to capture efficiencies make it stand out.

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Shyam Metalics' foray into the aluminium and stainless steel businesses "showcases execution visibility", while new projects which will commence later in FY25/26 provide strong earnings visibility, UBS said, adding that the company is mitigating profitability risk via diversification.

Shyam Metalics is moving from a being a producer of commoditised product to value-added offering; i.e., from sponge iron to battery-grade aluminium foil, UBS noted. As a result, the company is expected to clock better margins, lower susceptibility to commodity price swings, and a better return ratio.

UBS sees strong earnings acceleration visibility for Shyam Metalics after the Rs 10,000 crore capex plan between FY22-27 which will be funded via internal accruals and existing cash. The capex plan is for multiple projects, products and efficiency improvement, and therefore lowers risk to earnings in case of any project delays.

"We expect all new projects to come on line by FY27 with Rs2,500 crore to be capitalised in FY25 and the balance Rs 4,900 in FY26 and FY27. We estimate this capex could generate additional EBITDA of Rs26bn in three years resulting in EBITDA/PBT CAGRs of 39 percent/50 percent in FY24-27," said UBS.

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