Shyam Metals & Energy: Delivering Good Growth

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Shyam Metals & Energy: Delivering Good Growth

e expect steel equivalent volumes to grow at Source: Bloomberg

an 8% CAGR over FY26-29E.

Product mix improvement: We expect SHYAMMET's product mix to strengthen driven by Exhibit 1 - Multifold increase in stainless and

rising share of stainless steel and cold-rolled steel. It is also moving up the value chain in carbon carbon steel capacity

steel with: 1) ongoing special bar quality (SBQ) expansion, targeting premium automotive 5.04.5 SHYAMMET:Capacity (mt)

applications, and 2) rising share of flat products in the portfolio. SHYAMMET aims to nearly 4.03.5

triple its EBITDA by FY31, led by ongoing capacity expansions and mix improvement. 3.02.5

2.0 4.4

1.5

Some moderation in commodity prices: India long steel, sponge iron and iron pellet prices 1.00.5 0.12 0.85 2.0

Current FY30E Current FY30Ehave moderated from respective recent peaks, partly driven by monsoon-related seasonality. 0.0

The benefit from lower-cost raw material inventory that supported Jun-Q margins is also .Source: CompanyStainlessdata,Steel Jefferies estimatesCarbon Steel

expected to fade in Sep-Q. We, hence, expect EBITDA/t to contract from Rs5.7K in 1Q to

Rs4.9K in 2Q, but subsequently recover to Rs5.1K/Rs5.5K in 2HFY27/FY28 as seasonal effects Exhibit 2 - 15% EPS CAGR over FY26-29E

normalize and product mix improves. 2018 SHYAMMET: CAGRs (%, FY26-29E)17

16 15

11Retain Buy: We raise FY27-29E EPS by 2-4%; we expect EBITDA and EPS CAGRs of 15-17% 141210 8

over FY26-29E. We see balance sheet turning from Rs6.8bn net cash in FY26 to Rs6.4bn net 86

debt by FY29E due to ongoing capex, yet leverage levels would be at just 0.2x net debt/EBITDA. 420

volumesThe proposed Rs45bn equity raise may partly offset the debt increase. We retain Buy with a .