ASTL: Analyst briefing takeaways
Amreli Steels Limited (ASTL) conducted its analyst briefing for FY19 results yesterday. Following are the key takeaways:
- ASTL announced FY19 profits at PKR32.8mn (EPS: PKR0.11), compared to profit of PKR1,585.2mn (EPS: PKR5.34) for FY18. For 4QFY19, the company reported loss per share (LPS) of PKR0.64 compared to EPS of PKR1.98 during the corresponding period last year.
- The company posted a topline of PKR28.5bn (up 84.5% YoY) courtesy of volumetric growth post expansion as the company sold around 277,416 tons in FY19 vs 172,448 tons last year.
- However, a combination of higher electricity costs, rapid rupee devaluation, and higher depreciation charge owing to capitalization of the plant led the gross margins for the company to settle 9.4pps lower at 8.4% in FY19 vs. 17.8% in FY18.
- Moreover, operating margins (4.2% in FY19 vs. 12.1% in FY18) have reduced owing to higher marketing and distribution costs. Higher distribution costs were noted from concentration of volumetric sales in north and expansion of company operated outlets.
- Due to increased borrowing and higher interest rates, financing costs increased more than 2x to PKR1.3bn for FY19.
- As per management, ASTL is currently operating at an estimated overall market share of 6% while the company is targeting increase in volumetric sales in the North that remains lucrative in terms of demand.
- Apart from increasing market share in North, ASTL is focusing on implementing cost efficiencies in order to increase contribution margin mainly from reduced power costs.
- Current price of rebar stands at PKR110k/ton in South and in the North prices are at PKR108k/ton. To note, average prices recorded for FY19 stood at PKR97k/ton.
- The company management expects steel scrap price to be in the range of USD290-300/ton, which is significantly lower prices in the start of FY19 of USD380/ton. This is because of continued concerns of trade war between US and China and ban of imports of steel scrap in China.
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.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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