MUGHAL: Benefits of planned capex largely priced in; Neutral
- •We lower our rating on MUGHAL from Buy to Neutral with a TP of PkR156/sh following 12% rally since our last report. Our new estimates reflect management guidance on cost efficiencies and capacity enhancement of the bar rerolling mill; the BMR is going to enhance the former’s capacity by 90,000tons per annum.
- •The company has resorted to a rights issue of 100% at par to partly fund the Capex of PkR1.75bn, contrary to our assumption of 100% debt financing. This will raise PkR1.25bn, while the remaining PkR500mn will be financed through debt. As a result, we have adjusted up our earnings estimates with lower finance costs.
- •We reiterate our optimism for the game-changing development of additional captive power generation (18.6MW). MUGHAL is undergoing an installation of six engines to add gross capacity of 18.6 MW to its existing CPP of 9.1MW. Besides this, the company is also planning to undergo a BMR procedure to improve cost efficiencies.
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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