FLASHNEWS:

AKD Securities Limited Equity Research – Daily Report (06-07-2021)

Karachi, July 06, 2021 (PPI-OT): Pakistan Steel: Scrap at 7yr high – rebar prices to increase further

International scrap prices have increased by 21% CYTD to currently stand at US$517/mt compared to CY20 avg. of US$287/mt as global demand recovers with economic activity picking up while supply remains restricted

Additional stimulus to scrap prices has been provided by China lifting restrictions on import of scrap as local Chinese scrap prices made multi year highs on account of robust demand.

Due to robust demand (derived steel demand increased by 18% in FY21), local players were able to manage increase in input costs (scrap prices up by 90.5% for FY21) through swift pass on (local rebar prices up by PKR36-40K/ton or up by 36.4% FYTD).

ASTL has posted performance of 92% against 75.1% of KSE-100, an outperformance of 16.9% since Mar’20 while moving forward, with earnings growth of 17.0% for FY21-24 and PEG of 0.48x, we expect the stock to continue performing with our TP of PkR64/sh providing an upside of 45.1%.