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EUR 9.24 For Business Accounts Only

ASTL_Demand recovery, but with caveats, (AKD Daily, Dec 11, 2020)

AKD Daily

ASTL: Demand recovery, but with caveats

  • We raise our near term earnings estimates for ASTL, incorporating a swifter than expected recovery in demand and consequent better pricing dynamics leading to swifter margin recovery as well.
  • At its core, we revise our earnings estimate for FY21/FY22F to PkR2.74/3.70 per sh (vs. PkR1.57/3.2 per sh previously). Consequently, our rolled over Dec’21 TP comes to PkR58 per sh (vs. 56 per sh previously).
  • Although the company now enjoys considerable pricing power as evident from the recent consecutive hikes (two within 15 days), rising feedstock cost is a major near term risk, as complete and swift pass-on of a steep increase in scrap prices (~40% since early Nov’20) would still be a challenge for the company.
  • The company’s current re-bar prices (post latest increase) reflect scrap price of US$350-360 per ton and the latest international prices have risen to north of US$400 per ton, which means the company would at least need to further increase its rebar prices by PkR4000-6000 per ton to maintain its margin profile.
  • While the company offers 23% upside from our revised rolled over TP of PkR58 per share, we advise against building new positions until clarity emerges on how the scrap saga settles.  

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AKD Securities Limited
AKD Securities Limited

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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