Intermarket Pulse: MUGHAL: Capex & delay in BMR trim our TP; still a Buy
- We maintain Buy rating on MUGHAL while slightly reducing our TP from PRs91/sh to PRs87/sh, which offers upside of 18%. We revise down our earnings estimates by 19% for FY19F due to the announced delay in COD of BMR. However, EPS estimates beyond FY19F are up by 6% on average.
- MUGHAL has announced a major expansion termed ‘Phase II’ which amounts to c.PRs2.30bn. The plan includes expanding capacity of the melting facility by 396,000 tpa along with water treatment plant to facilitate direct rerolling. Meanwhile, the current BMR project of bar mill is delayed by 6mths and its cost is also revised up.
- The stock is currently trading at FY18F P/E of 15.4x but this compresses drastically to 7.8x in FY19F. We expect 3yr EPS CAGR of 63% on the back of additional 40MW in its power supply and other cost-efficiencies. Gross margins are on a rising trend (13%) and are likely to close the gap with that of Amreli Steels (ASTL) at c.16%.
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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