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Lloyds Metals and Energy reported 1Q consol. EBITDA of INR7.9bn, marginally above JMFe of INR7.6bn. Key takeaways from the call – a) LMEL received Environmental Clearance (EC) for mining expansion to 26mn tons from 10mn tons currently b) production guidance for FY26 – iron ore / pellet at 22mn tons / 2.8-3mn tons respectively c) annual capex spend is expected to be INR75-80bn over the next 2-3 years d) company witnessed realization to be higher by INR200-300/t so far in 2Q e) during the quarter company announced 2 strategic equity investments in MRPPL (19.4%) and BRPL (49.9%) to strengthen its market position in the pellet segment which is expected to bring 6mn tons of incremental pellet capacity f) consolidation of the MDO business will happen 2QFY26 onwards. g) major projects remain on track with some being ahead of schedule. Company continues to focus on cost optimisation across the value chain - acquisition of 79.82% stake in the MDO business of TEMPL in Dec’24 – expected to save costs to the tune of INR400-500/t. Volume-led growth pipeline, favourable duty structure and focus on value addition augurs well for the earnings trajectory. We roll-forward our target price to FY28 at an EV/EBITDA multiple of 6.5x. Maintain BUY.

* Operating margins improve given higher realisation and lower costs:

The Company registered consolidated revenue from operations of INR23.8bn (-1% YoY) given lower volumes (-4% YoY) partially offset by higher realisation (+3 % YoY). Sales volume for the quarter came in at 3.5mn tons compared to 3.6mn tons in 1QFY25. The company reported EBITDA of INR7.9bn (up ~11% YoY) driven by higher realisation and lower costs. Consequently, EBITDA/t improved by INR306/t to INR2.3k/t compared to INR1.9k/t in 1QFY25. Adj. PAT came in at INR6.4bn, up 15%YoY

* Focus on cost optimisation across the value chain: Company acquired 79.82% stake in the MDO business of TEMPL in Dec’24 by subscribing to 700mn equity shares worth INR700mn in TEIL. Post the acquisition of this business the company is expected to save costs in its core iron ore mining operations to the tune of INR ~400/t-500/t and the margin profile is expected to improve significantly over the next few years aided by commissioning of downstream capacities and volume growth. The consolidation of the MDO business financials is expected to happen from 2QFY26 onwards

* Integrated operations to drive performance; projects on track (refer exhibit 2): The company incurred capex of INR13.2bn in 1Q and guided for an annual capex spend of INR75-80bn over the next 2-3 years. LMEL during the quarter received Environmental Clearance (EC) for mining expansion to 26mn tons from 10mn tons currently. Production guidance for FY26 – Iron ore at 22mn tons / Pellet at 2.8mn-3mn tons respectively. The iron ore production in 1Q stood at 4mn tons. During the quarter the company announced 2 strategic equity investments in MRPPL (19.4%) and BRPL (49.9%) to strengthen its market position in the pellet segment which is expected to bring 6mn tons of incremental pellet capacity. Major projects remain on track with some being ahead of schedule. The 4mtpa pellet plant commenced operations in 1Q and pellet plant 2 remain on track.

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SEBI Registration Number is INM000010361