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ICICI Securities Repo
Shyam Metalics and Energy Ltd.'s Q4 FY22 earnings surprised on the back on higher realisations. Gross margins increased ~ Rs 1000/tonne QoQ while Ebitda margins increased ~ Rs 1760/tonne QoQ.
Increase in imported (thermal) coal costs will impact margins from Q2 FY23 (in our view).
Nevertheless, increase in volumes – expected to increase to ~2.1 million tonne in FY23E (up 35% YoY) along with cost improvement projects (captive power, railway siding) will help support earnings.
Shyam Metalics has paid dividend of Rs 7.2/share (Rs 4.5/share interim) in FY22; ~ 10-15% of free cash flow (post sustaining capex).
Conservative capital structure with net cash of ~Rs 4.8 billion and growth capex funded through internal accruals will allow improvement of shareholder returns in our view (payout as well as % of FCF returned to shareholders).
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