Buy Indian Metals and Ferro Alloys; target of Rs 1510: Anand Rathi

Anand Rathi's research report on Indian Metals and Ferro Alloys

The largest fully integrated value-added ferrochrome producer in India, IMFA is raising production capacity ~35%, from ~284,000 tonnes to ~384,000 with a greenfield ferrochrome plant at Kalinganagar expected by mid CY26. It has received in-principle approval to expand capacity a further ~200,000 tonnes. To support expanded operations, environmental clearance for its captive chrome ore mines at Sukinda and Mahagiri has been raised to 1.2m tonnes, with ore raising of 0.9m tonnes expected by FY28 and 1.2m by FY31 (PRC). Besides, levering the available land bank and bulk raw material handling infrastructure at Therubali, it is setting up a 120kL/day ethanol plant. This value-accretive diversification is expected to generate ~Rs3bn revenue yearly with an 8-10% EBITDA margin. >80% of demand for ferro-chrome, a key ingredient in stainless steel production, is driven by the industry. Demand in India for ferrochrome is expected to rise further as stainless steel consumption grows, backed by urbanisation, government initiatives to boost manufacturing and infrastructure, and greater demand from automotives, railways, etc.

Outlook

Considering IMFA’s fully integrated operations, ~0.1x leverage and high-teen return ratios, we initiate coverage with a Buy rating and a sum-of-parts TP of Rs1,510.