.

follow-on-google-news

According to Steelradar, India’s sponge iron sector is a vital component of the steel industry, producing approximately 52 million tonnes in FY 2023-24, marking an 18% increase from the previous year. As the world’s largest producer since 2003, India contributes 13% of global sponge iron output, primarily using coal-based methods. 

With a market capitalization of Rs 58,466.03 crore, the shares of Lloyds Metals And Energy Ltd were trading at Rs 1,118.30 per share, decreasing around 0.80 percent as compared to the previous closing price of Rs 1,127.30 apiece. 

Brokerage Recommendation

Incred Equities, one of the well-known brokerages in India, gave a ‘Buy’ call on the Iron stock with a target price of Rs 1,476 apiece, indicating a potential upside of 32 percent from Wednesday’s price of Rs 1,118.30 per share. 

Target Rational

According to the brokerage, India has an iron ore deficit, owing mostly to the unavailability of freshly auctioned iron ore mines and a mismatch between steel scrap availability and expanding steel output, both of which are projected to result in a supply constraint. Incred’s worst-case scenario predicts that this shortfall will begin in fiscal year 27. 

Moreover, Incred expects that iron ore prices will climb as a result of the supply bottleneck, with Lloyds Metals positioned to gain directly from the increased pricing. Lloyds Metals is also expected to grow its earnings-per-share (EPS) CAGR by 76 percent between FY24 and FY27, according to the brokerage. 

Financial performance:- 

Analyzing the company’s financial condition, revenue ramped up by 25 percent from Rs 1,091 crore in Q2FY24 to Rs 1,364 crore in Q2FY25, during the same time frame net profit jumped by 30 percent from Rs 231 crore to Rs 301 crore. 

Market condition:- 

The domestic iron ore market remains buoyant, with stable international prices around $100 for the 62% grade. A double price increase in India for the first time in months, alongside increased demand for high-quality ore, positively impacts the iron ore business outlook. 

Project Update:- 

The company completed an 85-kilometer slurry pipeline in record time (8-9 months). The first pellet plant in Konsari will finish within the financial year. Progress continues on the DRI plant in Ghugus, with plans for a second pellet plant and 1.2 million-ton wire rod mill. Mine expansion permissions are underway. 

Cost Structure and Guidance:- 

Iron ore realization for Q2 FY25 was ₹5,516/ton (up 19% YoY), with EBITDA per ton at ₹1,668 (up 17% YoY). Production guidance for FY24-25 is 13-14 million tons, subject to EC approval for expansion by mid-February. 

Capex plan:- 

The company plans a capital expenditure of ₹1,690 crores in FY24 and ₹1,714 crores in H1 FY25, with guidance of ₹3,400-3,500 crores for FY25. Future capex will be funded through internal accruals to avoid debt, with similar expenditures in subsequent years. 

Market Outlook:- 

The steel market is projected to reach 300 million tons by 2030, but a potential mismatch between demand growth and iron ore supply looms due to upcoming mine expirations. Ongoing collaboration with BigMint will guide strategic decisions amidst these challenges. 

Company Snapshot:- 

Lloyds Metals and Energy Limited is an India-based company, which is engaged in the mining of iron ore, manufacturing of sponge iron, and generation of power. It operates through three segments: Sponge Iron, Mining, and Power. The Sponge Iron segment includes the production and manufacturing of sponge iron. 

Written by:- Abhishek Singh

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

×