ASTL: Medium term headwinds dwarf long-term positives
- Following upheaval in the macro-landscape, we have revised down our earnings estimates for ASTL by 19% over the investment horizon (FY19-24F), incorporating change in management plans w.r.t SITE expansion and recent fundamental shifts (i.e. interest rate hikes and rupee devaluation).
- As a result, our revised rolled forward (Dec’19) TP comes to PkR80/sh (previously PkR117/sh), with majority of downward revision coming from the change in macro-assumptions (i.e. Rf at 13% vs. 10% previously).
- ASTL has scrapped the SITE expansion plan, replacing it with a more ambitious expansion road map, that will increase the company’s capacity to 1,105k tons from current 605k tons.
- While we await granular details to incorporate in our estimates, our preliminary workings suggest that the expansion project could add PkR33/sh to our TP, assuming debt to equity mix of 70/30%.
- Even so, wider market tumult has impacted ASTL (-26%FYTD), where despite 58% total upside, we advocate for a long term investment horizon considering medium term headwinds, and call for a ’Buy on dips’ approach.
Amreli Steels Limited is a Pakistan-based steel manufacturing company. The Company is engaged in the manufacture and sale of steel bars and billets. The Company offers a range of steel bars for all construction needs.
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AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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