Shyam Metalics and Energy Limited — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

Shyam Metalics delivered a robust performance in Q3 FY25, characterized by significant capacity expansion and strong bottom-line growth despite global steel price pressures. The company successfully transitioned more of its portfolio toward value-added products like cold-rolled coils and specialized foils while maintaining high cost-efficiency through captive power and heat recovery systems. Management remains highly confident in its long-term growth trajectory, targeting a substantial EBITDA increase by FY27-28.

Highlights

  • Revenue grew 13.2% YoY to ₹3,753 crores, driven by a higher mix of finished steel (49% of revenue).

  • Operating EBITDA increased 12% YoY to ₹456 crores, with an EBITDA margin of 12.2%.

  • Profit After Tax (PAT) surged 57% YoY to ₹197 crores, maintaining a PAT margin of 5.3%.

  • Successfully commissioned a new blast furnace at the Jamuria plant and a cold rolling mill (CRM) complex.

  • Incurred ₹5,873 crores in capex out of a total planned ₹10,000 crores (59% completion).

  • Captive power sourcing reached 82% at a cost of ₹2.4 per unit, significantly lower than the grid cost of ₹3.03.

  • Exports contributed 11% to total revenue, with the company emerging as India's largest exporter of specialized foil.

  • Interim dividend of ₹2.25 per share announced, totaling ₹63 crores.

Concerns

  • Chinese Steel Exports

Key financials

  1. Revenue ₹3,753 Cr +13.2%YoY
  2. Operating EBITDA ₹456 Cr +12%YoY
  3. EBITDA Margin 12.2%
  4. PAT ₹197 Cr +57%YoY
  5. Net Cash Balance ₹768 Cr -30.1%QoQ

What they filed

Q1 FY27: revenue up 23.4%, net profit up 20.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,634 3,756 4,139 4,419 4,467 +23%4,421 +18%5,240 +27%5,455 +23%
EBITDA409 456 515 580 539 +32%487 +7%727 +41%765 +32%
Net profit216 197 220 291 260 +20%198 +1%312 +42%351 +21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Carbon Steel
    ₹43,684/ton Realization1.1% QoQ Realization Growth
  • Pellets
    7% Realization Growth₹750/ton Margin
  • Pig Iron
    27,414 tons Trial Sales Volume

Guidance & targets

Profitability

  • Annual EBITDA Profitability · FY27-28 · High confidence ₹4,000 crores
    by the year '27-'28, we are targeting, we should be able to touch INR4,000 crores with our new expansions coming up in aluminium and stainless steel and all.

    — Brij Bhushan Agarwal, VC & MD

Revenue

  • Stainless Steel Revenue Revenue · next 4-5 years · Medium confidence ₹7,000-8,000 crores
    Stainless steel as well, we focus ourselves like in next 4 to 5 years, we should be able to derive a revenue of close to around INR7,000 crores to INR8,000 crores, more than $1 billion just from the stainless steel business.

    — Brij Bhushan Agarwal, VC & MD

Margin

  • Pig Iron Margin per Ton Margin · FY26 · High confidence ₹2,500-3,000
    where the pig iron is concerned, we emphasize that we will be able to plug a margin of close to INR2,500 to INR3,000 a ton.

    — Brij Bhushan Agarwal, VC & MD

  • EBITDA Growth Margin · FY26 · Medium confidence 10-15%
    our EBITDA for the next year will definitely grow with the existing enhancement run rate, maybe in the tune of 10% to 15%.

    — Deepak Agarwal, ED Finance

Volume

  • Overall CAGR Volume · next 4-5 years · Medium confidence 15-17%
    So down the line, 4 to 5 years, I expect that we should grow at a CAGR of more than 15% to 17%.

    — Brij Bhushan Agarwal, VC & MD

Risks & concerns

  • Chinese Steel Exports

    high

    Steel exports from China averaging 9 million tons per month in 2024 have contributed to a decline in global steel prices.

    Management acknowledged

  • Sluggish Domestic Demand

    medium

    Macro environment challenged by sluggish retail demand and a slowdown in government spending.

    Management acknowledged

  • Raw Material Security (Iron Ore)

    medium

    Analyst questioned security of market-linked raw materials; management cited long-term linkages with OMC and private miners as sufficient.

    Analyst downplayed

Areas of evasion (1)

  • Specific realization trends for Q4 (Jan) were avoided as 'too early to share'.

Q&A highlights

2 direct
Drivers of EBITDA per ton expansion Direct
Once we had commissioned the blast furnace, we were able to extract the heat which comes from the blast furnace, and we were able to utilize some energy balance of the hot gases into the plant.

Explains how the company increased carbon steel EBITDA by ₹1,000/ton while peers saw declines, highlighting structural efficiency gains.

Asked by Amit Dixit, ICICI Securities

Future EBITDA floor and growth potential Direct
By the year '27-'28, we are targeting, we should be able to touch INR4,000 crores with our new expansions... we want to reduce the volatility in our business strategy.

Confirms a massive step-up in profitability targets (from ~₹2,000 cr to ₹4,000 cr) as new high-margin segments like aluminium and stainless steel ramp up.

Asked by Shaleen Kumar, UBS Securities India

Ductile Iron (DI) Pipe business ramp-up Partial
DI will take another couple of years to commission. But as an overall thing, DI is a very small investment on the total capex cycle at a group level.

Management downplays the immediate impact of the DI pipe business, noting it is a small part of the overall strategy and has a longer registration/ramp-up cycle.

Asked by Rajesh Majumdar, B&K Securities

2 min read 5 chapters

Detailed narrative

Operational Transformation via Jamuria Expansion

The commissioning of the blast furnace at the Jamuria plant is a pivotal milestone for Shyam Metalics. This facility allows for significant cost savings by extracting heat and utilizing hot gases in the steelmaking and rolling processes, contributing to a ₹1,000 per ton EBITDA improvement in carbon steel. The company also commissioned a cold rolling mill complex, starting trial production of CR coils, which marks its entry into higher-value flat products.

Strategic Pivot to Value-Added Products

Management is aggressively shifting the product mix toward value-added segments to reduce volatility. Specialized foil products have already made the company India's largest exporter in that niche. Looking ahead, the company plans to derive over $1 billion (₹7,000-8,000 crores) in revenue from the stainless steel business alone within 4-5 years, focusing on niche applications like bright bars and stainless wires.

Cost Leadership through Integration

A key competitive advantage highlighted was the 82% captive power sourcing at a cost of ₹2.4 per unit, compared to the grid cost of ₹3.03. This delta significantly bolsters EBITDA margins. Furthermore, the upcoming commissioning of an oxygen plant in March and a new power plant in Odisha by April/May 2025 is expected to drive an additional ₹2,000 per ton in cost savings for the pig iron business.

Aggressive Capex and Capital Allocation

The company has incurred ₹5,873 crores of its planned ₹10,000 crore capex, with ₹4,350 crores already capitalized. Despite this heavy investment phase, Shyam Metalics remains net cash positive with ₹768 crores. The capital allocation policy is disciplined, reinvesting 70% of cash flow into the business while returning 10% to shareholders via dividends, as evidenced by the ₹2.25 per share interim dividend announced this quarter.

Long-term Financial Targets and Market Outlook

Management has set a clear target of reaching ₹4,000 crores in EBITDA by FY27-28, representing a near doubling from current levels. While acknowledging short-term headwinds like Chinese steel dumping and sluggish retail demand, the company expects a 10-15% EBITDA growth in the next year. They are positioning themselves as a unique metal conglomerate with a minimum double-digit CAGR and a focus on high-IRR projects (17-20%).

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