EUR 4.08 For Business Accounts Only

Intermarket Pulse: ASTL: Strong 3Q results and expansion commissioned; Buy

• We maintain our Buy stance on ASTL with rolled forward (Jun’19) TP of PRs106/sh (upside 27%). We slightly taper our FY18F EPS compared to previous estimates, as management hinted at lower utilization of Dhabeji rolling mill and power shortage at SITE facility. We estimate FY18F EPS at PRs5.09.
• Our EPS estimate for FY19F is PRs14.67 (down 5% from previous estimate) as we have trimmed our volume assumptions for FY19 upon management’s indication of gradual ramping up of utilization at Dhabeji Rolling mill, rather than a full year average of 70%. FY20F EPS will drop to PRs7.30 on account of planned shutdown of 10mth at SITE rolling mill for expansion.
• 3QFY18 earnings (EPS: PRs1.59) were above expectations due to handsome margins (21% vs 19.5% SPLY) and sales volumes. Underlying demand growth as indicated by cement sales suggests a strong case for expansion with duty structure intact to limit imports. However, post-FY21 the industry may witness stiff competition amid expansions from other players, in our view.