Lloyds Metals surges 7.3% on Friday: Key reasons behind the gain

Lloyds Metals surges 7.3% on Friday: Key reasons behind the gain

Lloyds Metal’s stock was buzzing on Friday, with shares gaining by 7.31% to close at ₹1,039.50, following a positive note from brokerage firm Anand Rathi.

The firm has initiated coverage on the stock with a “buy” rating and set a target price of ₹1,260 per share.

Expectations of strong earnings growth for the company back Anand Rathi’s optimistic outlook. They predict the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) will grow by nearly 65% over the next three years.

One of the report’s key highlights is Lloyds Metal’s iron ore mine, which has been a point of focus for the brokerage. Unlike many other companies that face the uncertainty of auction processes for their mines, Lloyds Metal’s mine was not allotted via an auction, which means its validity extends until 2057. This long-term stability removes any uncertainty and eliminates the risk of high premiums that other companies must pay for mining rights.

Lloyds Metal is also focused on significantly increasing its mining capacity. The company currently has environmental clearance (EC) to extract around 10 million tonnes of iron ore annually. However, the company is on track to boost its capacity to approximately 25 million tonnes of usable ore in the coming year. By the end of the next few years, the company plans to increase its total capacity to 55 million tonnes, with an estimated 25 million tonnes likely to be sold in the upcoming year alone.

Lloyds Metal is looking to move beyond iron ore mining to diversify its operations and increase its market footprint. The company is focused on forward integration and plans to invest around ₹33,000 crore in capital expenditure (capex) over the next few years. As a result, Lloyds Metal is set to become a fully integrated steel company.

Additionally, Lloyds Metal stands to benefit from the Investment Promotion Scheme (IPS), which will provide financial incentives for the capital expenditures they undertake.

On Friday, the stock gained by 7.31% to close at ₹1039.50 per share. The company currently has a market capitalisation of ₹54,346 crore and has delivered returns of around 73% year to date.

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