Pakistan Steel - Mughal Iron & Steel Industries Limited - Initiating Coverage
- We initiate coverage on MUGHAL with a Neutral rating and a TP of PkR102/sh (10% total return). Profits are expected to grow 40%YoY in FY17F due to gas supply resumption in 2QFY17. However, growth trajectory should moderate to single-digits over the medium-term, with risks emanating from increased volatility in billet prices.
- The 9.3MW captive power plant will be able to fire-up the furnaces on account of gas supply resumption from SNGPL (2mmcfd), which should result in annual cost savings of more than PkR1/sh. This incremental power supply has been dedicated to the melting facility since the recently imposed 15% RD has driven-up billet prices.
- MUGHAL trades at a FY17F P/E of 9.7x, at a discount to both the Cement sector and ASTL. This can be attributed to lower pricing power and operational disadvantages compared to both, in our view. Positive surprises can emanate from extraordinary PSDP spending ahead of 2018 elections, and CPEC.
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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