Pakistan Steel_MUGHAL Relishing multiple growth fronts, (AKD Daily, Nov 30, 2021)
AKD Daily
Pakistan Steel: MUGHAL Relishing multiple growth fronts
- We update our investment case on Mughal Steel & Iron Industries (MUGHAL) post corporate briefing session and release of 1QFY22 accounts where we incorporate MUGHAL’s higher than expected sales volume, increasing our FY22 sales volume assumption to 350k tons from 330k tons earlier for long-rolled segment while for copper segment, we have increased our assumption to 8k tons from 7.5k tons earlier (EPS for FY22F increased to PkR19.0 form PkR17.2).
- The outlook for long rolled segment remains promising on the back of ongoing construction boom across the country aided by by Govt. incentives, housing loans and robust retail demand. We expect MUGHAL’s topline to witness a CAGR of 21% for FY21-24.
- At the same time, copper segment is also flourishing as the segment’s contribution towards gross margins increased to 47.8% for 1QFY22 against 44.1% for FY21 while moving forward, copper prices are expected to stand their ground as global drive towards reducing carbon emissions intensifies.
- In light of robust earnings in 1QFY22 on the back of higher rebar and copper prices, MUGHAL has performed well, up 8.8% in Nov’21 compared to KSE-100 -1.9% in Nov’21, an outperformance of 10.7%. The company currently trades at FY22 P/E of 5.4x while 3-yr PEG stands at 0.17x with our TP of PkR140/sh providing a capital upside of 36.3% from last close.
AKD Research
Mughal Iron & Steel Industries Ltd. Mughal Iron & Steel Industries Limited is engaged in manufacturing and trading of mild steel products. The Company is engaged in producing steel in the long-rolled steel products, which has a capacity of 688,000 metric/tons of re-rolled steel per annum. The Company is engaged in multidimensional activities from making billets of mild steel, spring steel, deformed bar, re-bar, cold twisted rebar and a range of sections, such as I-beams, L-sections, C-section, H-beams and T-bar. The Company offers its products under various categories, including Smelting, such as Ferro Silicomanganese, Ferro Chrome and Ferro Silicon; Billet, such as Mild Carbon Billets, Spring Steels, Austentic Stainless Steel, Ferrite Stainless steels and Alloys Steels; Bars, including Deformed Bars, Re-inforcement Bars and Thermax Bars; Beams, including I Beams (Girders), Angle Section (L Section), T Bar (T section) and C Channel, and Grade and Specifications, including ASTM A 615 G-40 and ASTM A 321.
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