Intermarket Pulse: Pakistan Steel: Mixed trends expected for 3QFY18 results
- For 3QFY18 results, we expect flattish margins for ASTL and MUGHAL despite higher raw material prices along with abrupt currency devaluation. The cost escalations were mitigated by quick price increases amid strong demand. Reported earnings will however be mixed because of likely tax normalization in case of ASTL.
- ASTL is expected to post an EPS of PRs0.99, a decline of 11% QoQ as it booked low ETR in the previous quarter; we estimate an ETR of 22% in 3QFY18. MUGHAL, on the other hand, will likely see a jump of 7% QoQ in earnings due to greater increase in selling prices relative to cost push; our EPS estimate is PRs1.34.
- In flat steel category, we expect ISL to post EPS of PRs2.29 in 3QFY18, down 15% QoQ. HRC prices staged a sharp increase post Sep’17 but cooled off after Jan’18. Moreover, abrupt PKR devaluation in Dec’17 may have had an impact, where we understand ISL hesitated on price increases as the company faced stiff competition from imports. We foresee c.16% margins (down 1.40ppt QoQ) in 3QFY18.
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.
International Steels Limited is a producer of flat steel products. The Company manufactures cold rolled steel coils, galvanized coils and color coated steel. Its cold rolled steel is available in thicknesses ranging from 0.25 millimeter (mm) to 3.0 mm; galvanized steel is available in thicknesses of 0.25 mm to 2.0 mm, and color coated steel is available in thickness range of 0.20 to 1.50 mm. Its rolling capacity is 500,000 metric tons (MT). It produces approximately 400,000 MT of galvanized products. It produces color coated sheets on various substrates, including cold rolled, galvanized, galvalume, aluminum and stainless steel sheets. Its cold rolled steel offers applications, such as ceiling lights, tube lights, ceiling fans, oil drums, lube drums and motor cycle frame; galvanized steel has applications, such as packaging, furniture, washing machines, gas ovens and microwave ovens, and color coated steel offers applications, such as ice boxes, tubs, buckets and storage bins.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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