The shares of the leading manufacturer of steel gained up to 3 percent from a day low after the company announced the acquisition of a 79.82 percent stake in the Mining Development and Operation (MDO) business of Thriveni Earthmovers Private Limited.
With a market capitalization of Rs 60,978.14 crore, the shares of Lloyds Metals & Energy Ltd were trading at Rs 1,166.35 per share, decreasing around 1 percent as compared to the previous closing price of Rs 1,179.25 apiece.
Reason for rise;-
According to the company filing, Lloyds Metals & Energy Ltd announced the acquisition 79.82% stake in the Mining Development and Operation (MDO) business of Thriveni Earthmovers Private Limited (“TEMPL”) through an investment of ₹ 70 crore in Thriveni Earthmovers and Infra Private Limited (“TEIL”), which shall become a subsidiary of LMEL on completion of said investment.
Furthermore, LMEL plans to ramp up Surjagarh Iron Mine output from 10 MnT to 55 MnT, targeting cost savings and leveraging a ₹70,000 crore Mining Development and Operation (MDO) order book. From FY26-28, the MDO business aims for ₹27,000 Cr revenue and ₹9,000 Cr EBITDA, boosting profitability.
Moreover, TEMPL’s MDO business is demerging to TEIL, pending NCLT approval. TEIL will issue ₹2,157 crore in redeemable preference shares (RPS) to TEMPL’s shareholders as consideration, with redemption planned through internal accruals over the coming years.
Brokerage Reccomdation:-
Recently, 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 27 percent from Thursday’s price of Rs 1,166.35 per share.
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 a 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
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