International Steels (ISL): 1QFY19 EPS Rs1.9, -16% YoY (-26% QoQ); (Below expectations)
- International Steels (ISL) recorded 16% YoY decline in earnings to Rs1.9/share, mainly on back of decline in GP margins by 2.1ppts YoY to 14.4% amid rising raw material (HRC) cost and rupee devaluation. CRC prices during outgoing quarter were up by 6% YoY while Pak rupee has seen devaluation of 18% YoY to average Rs124 per US$ in 1QFY19.
- Sales of the company witnessed drop of 12% on sequential basis, which suggest volumetric decline of 10-15% QoQ in our view despite of the expanded capacity which came online in end of Jun 2018.
- On top of that, finance cost of the company went up by 153% YoY as last year the company was capitalizing its amount. Further, higher interest rate (KIBOR) is also one of the reason behind upsurge in finance cost.
- Growth in Selling and distribution charges (+22% YoY) could be due to higher freight/travelling charges amidst rise in fuel rate, we believe.
- Effective tax rate during the quarter was lower at 26% vs. 28% in corresponding period of last year.
- We flag 1) downward revision in duty structure, 2) volatility in commodity prices, 3) dumping from countries not protected by anti-dumping duties, & 4) devaluation beyond our assumptions, as key risks.
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.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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