International Steels (ISL): 3QFY18 EPS Rs2.4,+23% YoY (-11% QoQ) (In-line with expectations)
- International Steels Limited (ISL) reported 3QFY18 EPS of Rs2.4, up 23% YoY, in-line with our forecast.
- ISL surpassed its own sales record, posting highest ever quarterly sales revenue of Rs12.6bn, up 32% YoY while up 10% QoQ. We attribute this phenomenal growth to increase in both selling prices and volumes.
- Price increases were in-line with average international flat steel prices (HRC/CRC) during the outgoing quarter, up on average by 15% YoY while up 3% QoQ.
- Gross margins contracted by 224bps to 15.8% in 3QFY18 vs. 18.04% last year. This was likely due to lower spread between Galavanize Product and HRC in the outgoing quarter. However gross profits were up 16% YoY while flat sequentially.
- ISL earning were dented by higher other operating expenses, up 139% YoY. We attribute this to exchange loss booked by the company in the outgoing quarter.
- Profit before tax during 3QFY18 rose 7% YoY to Rs1.5bn while net earnings grew by 23%. This was on the back of lower effective tax rate (down 9pts to 29%).
- We flag 1) downward revision in duty structure, 2) volatility in commodity prices, 3) dumping from countries not covered by anti-dumping duties, & 4) delay in expansion commissioning, 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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