Pakistan Steel_Upbeat demand keeping scrap and copper prices robust, (AKD Daily, Nov 26,2021)
AKD Daily
Pakistan Steel: Upbeat demand keeping scrap and copper prices robust
- International scrap/copper prices have increased by 11.0%/11.1% since Oct’21 to currently hover around US$488/9,932/ton compared to FYTD avg. of US$473/9,485/ton amid power shortages and supply concerns which caused smelters to go offline from Chile to China.
- Impressive Chinese export growth in Oct’21(+27.1%YoY) to US$300.2bn has counterbalanced some of the pressure mounting on Chinese local manufacturers from emergence of enormous power shortage, supply-side disruptions and reappearance of covid-19 cases in China.
- Local rebar prices have increased by 9.7%MoM to PkR195-197K/ton in Oct-Nov’21 amid strong retail demand in construction sector (both north and south). A sign of considerable pricing power local manufacturers exhibit which was fairly reflected in 1QFY22 results of long steel manufacturers (GMs: 17.5% in 1QFY22 vs 13.4% in 1QFY21, up 4.1ppt).
- In light of robust earnings in 1QFY22 on the back of higher rebar prices, MUGHAL and ASTL have performed well, up 4.8% in Nov’21 compared to KSE-100 +0.6% in Nov’21, an outperformance of 4.2%. We prefer ASTL (TP: PkR58/sh, 38.1% upside) and MUGHAL (TP: PkR140/sh, 49% upside) with stocks currently trading at FY22 P/E of 5.14x/5.0x while on PEG basis, ASTL and MUGHAL are trading at 0.19x/0.16x
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.
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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