ASTL: Expansion keeps the wheels rolling
Following financial close of second expansion of melting/rolling capacity of 200k/125k tons, we revisit our investment case for ASTL. Incorporation of this second expansion (Dhabeji only, as SITE expansion has not achieved financial close) into our estimates, adds PkR28/sh taking the Jun'18 (DCF based) TP to PkR134/sh. We believe the company's aggressive expansion plans are key in meeting robust steel demand (+29%YoY in FY17), expected to emanate as spillovers from planned commercial infrastructure developments (evident from FY18's +37%YoY PSDP allocation) and residential construction to meet persistent housing units shortfall (~12mn units as per ABAD report, 2016). Thus, this opportune expansion is expected to add PkR4.66/sh to incremental earnings (beyond FY18F). Keeping these catalysts in mind, we prudently assume average capacity utilization at 76% (vs. management expectations of 80%), where deviations from our estimate would add upside to our TP/earnings estimates (see table-II). Backed by clarity over expansion-II along with improving fundamentals (5yr forward NPAT CAGR of 15%), we have a buy stance on stock with our revised TP of PkR134/sh, offering 43% upside. Buy!
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.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
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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