Shyam Metalics Q2 volumes shine; capex, value addition central to medium-term growth
Bigger gains for the company could come from prudent capital deployment and faster project execution.
Shyam Metalics and Energy’s shares gained over 5% after reporting that its September quarter (Q2FY27) consolidated sales volume rose 26% year-on-year (y-o-y) to 1.5 million tonnes. September was a strong month, with volumes rising 32% y-o-y and revenue growing almost 40% to over ₹ 2,000 crore.
The integrated metal producer also announced a memorandum of understanding with the Maharashtra government on Monday to set up a 9 million tonne per annum (mtpa) integrated steel plant in Chandrapur, entailing an investment of ₹ 50,000 crore.
The Q2 volume growth marks a significant improvement versus 8% y-o-y growth in Q1. Blended realization increased by about 7% in Q2, although some of the benefit is likely to be offset by higher coking coal prices.
Thus, revenue growth for H1FY27 now stands at 29% compared with the management’s guidance of 20% growth for FY27. The Q1 Ebitda had risen by 32% to ₹ 765 crore, as against the company’s 20% growth guidance for FY27.
Several levers support medium-term profit growth. The company is undertaking projects entailing capital expenditure of about ₹ 14,000 crore and has already spent ₹ 3,300 crore. This will increase its capacity to 14.6 mtpa across various categories of steel, intermediates and aluminium products by FY31, from the current 9 mtpa.
Captive renewable power generation is expected to help lower energy costs . The company targets a 600-700 basis point increase in return-on-equity under its Vision 2031 from about 10% in FY26.
However, the bigger gains could come from prudent capital deployment and faster project execution.
“Our review of completed and upcoming projects indicates that Shyam Metalics delivers capex at lower cost and with shorter timelines than the industry averages, supporting superior ROIC (return on invested capital) and faster growth,” UBS Securities India noted.
UBS projects the company’s Ebitda to improve to ₹ 8,400 per tonne by FY31 from ₹ 4,700 per tonne in FY26, with the share of intermediate products declining to 12% from 33% over this period.
Shyam Metalics shares have gained 26% so far this year and are trading at an EV/Ebitda multiple of 10, based on Bloomberg consensus FY27 estimates. A buoyant steel market aids earnings. However, timely commissioning of projects and the company’s ability to penetrate the market will be key for its growth trajectory.
