We had earlier recommended that investors accumulate Shyam Metalics in February 2025, when the stock was trading at ₹711 per share, or 7.5 times one-year forward EV/EBITDA. The stock has returned 36 per cent since then. The recommendation was based on its strong capex programme and foray into a value-added product mix.

The company continues on its expansion path and is eyeing an increasing contribution from its value-added portfolio over the next three years, overtaking the contribution from basic steel. The stock is now trading at 8.8 times one-year forward EV/EBITDA, which is a 10 per cent premium to even its last two-year average — a period of strong growth. Despite the premium valuation, we reiterate the accumulate call on the stock, considering its expansion and margin improvement prospects. With the imposition of safeguard duties on imports of cheaper steel, domestic steel realisations have also improved, which should further support the stock. The consensus estimates from Bloomberg indicate a revenue/EBITDA/PAT CAGR growth of 24/26/33 per cent for next two years which supports the premium valuation the stock is trading at currently.

Expansion

In the next one year, volume growth will be aided by recently-commercialised plants, while longer-term investments continue.

The company commercialised a cold rolling (CR) mill at its Jamuria, West Bengal plant in Q2FY26. This product accounted for 7 per cent of Q4FY26 revenues. This is a value-added steel product, with average realisations at a 75 per cent premium to normal steel prices. The company will expand the capacity to 400,000 tonnes per annum (tpa) from 250,000 tpa earlier. On full utilisation of the recent and earlier plants, the value-added CR mill segment should contribute 12-14 per cent of the sales mix in FY27-28.

Aluminium foils accounted for 4 per cent of sales in Q4FY26, and the segment will also double capacity in the next fiscal with a new plant constructed at a total cost of ₹800 crore. The new facility also includes a backward-integrated plant, which will manufacture the aluminium flats used to make foils. Integration allows for higher value capture and increased production. With aluminium foils having a margin that is 2-2.5 times that of finished steel, the profitability of the consolidated entity should improve despite the segment’s low revenue contribution.

The company has also commercialised a 450,000-tpa blast furnace for making intermediate steel at its Kharagpur plant, which should start sales gradually in FY27. More importantly, it has already initiated a steel downstream facility at the same location to produce value-added products from intermediate steel. The 800,000-tpa steel melting shop (SMS) will include long products such as bar and wire mill, and should be commercialised by FY30.

The SMS plant, at an expected cost of ₹900 crore, is part of the ₹2,700-crore capex announced by the company. The remaining ₹1,800 crore will be used to expand stainless steel capacity from 150,000 tpa to 750,000 tpa by FY30, which also includes value-added processes. With stainless steel realisations at a 220-250 per cent premium to carbon steel, stainless steel, along with aluminium foil and CR mill, will drive top-line growth and margin improvement in the short to medium term.

Margin expansion

The company announced capex of ₹9,500 crore in the first phase after its IPO in June 2021 and is nearing completion of the same. In the first phase, it added capacities in intermediate to finished steel and forayed into value-added products. It has announced its next phase of capex, wherein it will invest around ₹3,000 crore per year for the next three years.

In the next phase, the company will add capacity in the value-added segment, including hot and cold rolled mills, colour-coated sheets, long products and others. It expects to captively consume a large portion of intermediates — carbon steel, pig iron, iron billets and sponge iron — to increase the proportion of its value-added portfolio. As the low-value mix declines in the portfolio to support the growth of high-value products, margin improvement should strengthen, along with strong top-line growth.

The company funded the expansion in the first phase through internal accruals and a minor debt portion, and is likely to continue the same approach for the next three-year expansion as well. It had a net debt-to-EBITDA ratio of 0.2 times in March 2026, which is low for the steel industry.

Considering the strong growth outlook, execution capability, improved steel prices and margin outlook, we recommend that investors accumulate the stock, despite premium valuations and volatile raw material costs in the short term from coal, logistics and iron ore. The company has also added power plants and is nearing a phase of complete grid-independent power generation at a stated cost of ₹2.5 per unit.

Published on June 20, 2026