Lloyds Metals & Energy: PAT up 35% & Revenue up 26% in H1-25 at a PE of 35
Outlook for 30% volume growth in FY25. Ambitious capex program and forward integration to grow top-line to 6X. Strong growth expected in the coming years with margin expansion
1. Why is LLOYDSME interesting
lloyds.in | NSE: LLOYDSME
LLOYDSME is embarking on a transformative journey to become an integrated value-added steel producer, planning a significant capital expenditure (capex) that will 6X its size upon completion. LLOYDSME aims to execute this ambitious expansion without incurring debt, ensuring a robust balance sheet. The projected investments boast an impressive payback period of under 3.5 years and a return on equity (ROE) exceeding 35%, positioning LLOYDSME for substantial growth opportunities.2. Iron ore miner transforming into an integrated value added steel producer
3. FY20-24: PAT CAGR of 64% & Revenue CAGR of 24%
4. Strong FY24: EBITDA up 101% & Revenue up 90%
5. Q2-25: PAT up 30% & Revenue up 32% YoY
6. H1-25: PAT up 35% & Revenue up 26% YoY
7. Business metrics: Strong return ratios
The company intends to remain debt-free for all the projects.
7. Strong outlook: 30%+ growth in iron ore volume
i. FY25: 30%+ growth in iron ore volume
Iron Ore sales for FY25 expected to be 13 MMT up from 9.7 MMT in FY24. The risk is if timely EC clearance is not received.
FY24-25, so we expect around 13 million to14 million tons assuming that the EC for the expansion comes by mid-February or so.
ii. Iron Ore: Demand & Price outlook is strong
While outlook is strong one should watch out for headwinds in the prices
The iron ore market domestically remains buoyant. There is some headwind, but the prices have remained stable at around $100 for the 62% grade in the international market. And in the Indian market for the first time after many months we have seen a double price increase in the market itself
iii. FY25-27: New revenue streams coming online with margin expansion
The DRI, pellet, and steel plant will drive top-line growth. However, value addition in the steel plant, the backward integration with iron ore and the reduction of freight through the slurry pipeline will drive bottom-line growth faster that the top-line
FY25: we should be up and running with the first pellet plant and the slurry pipeline to go with it, as well as to double our DRI capacity to 700,000 tons and the pellet plant would be 4 million tons. That should be up and running by the end of this financial year.
FY26: we hope to start the second pellet plant of another 4 million tons
FY27: the 1.2 million steel plant would be June to September of 2026
iv. Targeting Rs 40,000 cr+ revenue after completion of capex
Approximately, our iron ore sales at that point of time will be around 6 million tons, sorry, 9 million tons, after our whole CAPEX plan is over. And steel pellet will be around 6 million tons, and other semis will be around half a million tons, and steel will be around 4.2 million tons. So, if you total all of that would come to 40,000 crores or probably a little more than that.
8. PAT growth of 35% & Revenue growth of 26% in H1-25 at a PE of 35
9. Hold?
If I hold the stock then one may continue holding on to LLOYDSME
Carrying forward after a strong FY24, H1-25 performance has been strong. Overall FY25 is expected to be strong given that H2-25 is expected to be better than H1-25
We foresee a much better H2 FY25
LLOYDSME capex projects are progressing as per plan one can hold on as long as the company is on track to transforming into an integrated value added steel producer
All our projects are progressing at breathtaking speed. Several projects are ahead of schedule, but we will maintain our capex deadline as previously guided. The fundraising undertaken by the company has supported fast execution of all the projects
10. Buy?
If I am looking to enter LLOYDSME then
LLOYDSME has delivered PAT growth of 35% and revenue growth of 26% in H1-25 at a PE of 35 which makes the valuations fully valued in the short term.
With an outlook of iron ore volume growing by 30% in FY25 a PE of 35 can be sustained in LLOYDSME from a FY25 perspective
The outlook of revenue growing 6X from around Rs 6,500 cr to Rs 40,000 by FY30 with margin expansion would create opportunity in LLOYDSME over the longer term. The timely execution of the capex projects is key for the thesis to play out
With a PE of 35 the margin of safety is limited in the stock and will not sustain a slowdown in business momentum and delays in capex execution.
Previous coverage of LLOYDSME
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