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Lloyds Metals hits 4-month high, rebounds 51% from March low; Time to buy?
Shares of Lloyds Metals & Energy (LMEL) hit a four-month high of ₹1,427, as they rallied 5 per cent on the BSE in Thursday's intra-day trade. The stock price of industrial minerals company inched towards its all-time high of ₹1,477.50 touched on January 10, 2025.
The market price of LMEL has bounced back 51 per cent from its March 2025 low of ₹943.25. In the past one year, the stock price of Lloyds Metals has more-than-doubled or zoomed 105 per cent, as compared to a 9 per cent rise in the BSE Sensex.
Industry outlook
The Indian iron ore market continues to be buoyant, defying the international market. The prices are very steady, and the demand on steel is running consistently at 8 per cent year-on-year and therefore, also on iron ore. The government's focus on steel capacity expansion has remained strong and multiple government initiatives have initiated the urgent need of scaling up of Greenfield iron ore mining as well as beneficiation.
Company outlook
As the second-largest steel producer globally, India faces growing demand from sectors such as construction, automotive and manufacturing. This demand is expected to continue rising, supported by abundant raw materials and affordable labor. India is poised to become the second-largest steel consumer globally, driven by growth in infrastructure and the automobile and railway sectors, LMEL said in its FY25 annual report.
The National Steel Policy 2017 targets a production capacity of 300 million tons by FY 2030-31, with a focus on boosting steel consumption in rural areas. Government initiatives like the Pradhan Mantri Awas Yojana and the Gati Shakti Master Plan support sector growth. Urbanization and a shift towards sustainable construction materials are expected to drive long-term growth. India's steel demand is forecast to outpace other countries by 2025, with growth in engineering, packaging and industrial manufacturing sectors, the company said.
The Indian Steel Association expects continued growth in steel demand, with sector consolidation attracting investments, creating opportunities for global players. The Production Linked Incentive (PLI) scheme is anticipated to boost specialty steel investments. While global steel demand is expected to grow modestly in 2025, India's growth is set to lead due to weak demand from major producers like China and Europe.
Opportunities
Rising Infrastructure and Industrial Expansion: Infrastructure investment in India has experienced significant growth, fuelled by both public and private sector contributions. Furthermore, the budget for 2025-26, aligned with the vision of Viksit Bharat by 2047, has allocated ₹ 11.21 trillion for the infrastructure sector. With increased investments in large-scale projects across both developing and developed economies, the need for these materials is expected to stay robust.
Government Initiatives: The Indian government is offering robust policy support to boost industries like manufacturing and steel production, driving economic growth through incentives such as tax breaks, subsidies and infrastructure investments.
In India, the government has introduced various measures to strengthen steel production, including the Domestically Manufactured Iron & Steel Products (DMI&SP) policy to promote 'Make in India' steel for government procurement and reducing Basic Customs Duty (BCD) on Ferro Nickel to zero. Additionally, it has extended duty exemptions on ferrous scrap until 2026 to support the domestic stainless steel industry and enhance competitiveness. Furthermore, India is expected to impose anti-dumping duties on few Chinese products, to protect domestic industries from underpriced imports, ensuring fair competition and safeguarding local producers.
Import Potential: The global demand for premium iron ore and steel is anticipated to continue increasing, particularly in emerging economies like China, India and other developing nations. These markets are witnessing significant growth in infrastructure and industrial development, which in turn drives the demand for raw materials. This creates a rising opportunity for suppliers to tap into these expanding markets, boosting export growth especially for high-quality products.
JM Financial Institutional Securities view on LMEL
LMEL is poised to continue its volume-led growth trajectory with environmental clearance (EC) now expected in Q1FY26 from an initial expectation of Q4FY25. This EC will boost company's mining capacity from 10 mtpa to 55 mtpa. The company is enhancing its presence across the ferrous value chain by setting up a 45mtpa beneficiation facility, a 12mtpa pellet plant (in phases), 85km and 190km slurry pipelines, a 1.2mtpa wire rod facility and a 3mtpa carbon steel facility under phases.
The company's strong focus on enhancing value by integrating steel manufacturing operations is expected to aid margins. Most of the projects remain on track with 360ktpa DRI plant taking slightly longer time than company's earlier estimates. The brokerage firm has a 'buy' rating on LEML with a target price of ₹ 1,610 per share.
About Lloyds Metals & Energy
LMEL works in iron ore mining, producing coal-based Direct Reduced Iron (DRI) or Sponge Iron and generating power. The Company is one of the largest coal-based DRI producers in Maharashtra, with a production capacity of 340,000 tonnes per annum (TPA) across two districts. LMEL operates a DRI plant in Ghugus, Chandrapur district, with a capacity of 270,000 TPA, alongside a 30 MW captive power plant. It also has a Greenfield plant in Konsari, Gadchiroli, with a production capacity of 70,000 tonnes per annum and a 4 MW captive power plant.
The company is the only iron ore miner in Maharashtra, holding a 50-year mining lease for the Surjagarh village in Gadchiroli district, which has the largest reserve of high-grade iron ore in the state, valid until 2057. LMEL has permission to mine up to 10 metric tonnes per annum (MTPA) of iron ore and is seeking environmental clearance to increase the capacity of the Surjagarh iron ore mines (SIOM) from 10 MTPA to 55 MTPA (including BHQ). The company's strategic location gives it access to key markets across India. The Company is also setting up a 3 MTPA fully integrated steel plant in Konsari, Gadchiroli. Additionally, with the upcoming DRI facility and a 1.2 MTPA Wire Rod mill in Ghugus, the company aims to become an integrated steel producer by the fiscal year 2030-2031, with a total capacity of 4.2 MTPA.
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