Karachi, November 29, 2021 (PPI-OT): MUGHAL: Corporate briefing session key takeaways

Mughal Iron and Steel Industries Limited (MUGHAL)’s corporate briefing session was held on Friday to discuss the FY21 result and outlook of the company. We present key takeaways from the session.

The company posted a profit of Rs3.4bn in FY21 compared to a profit of Rs0.6bn in the SPLY. Primary reasons for the increase in company’s profitability in FY21 were higher rebar prices (increased by 40% YoY) and better Gross and Net level performance primarily due to inventory gains.

Finance cost of the company decreased during the period due to a drop in interest rates and exchange loss. Tax expense on the other hand increased due to the recognition of deferred tax liability upon capitalization of bar re-rolling mill.

During FY21, company obtained approval for the BMR of its girder mill and successfully raised money through the issuance of 16% right shares for retiring the debt obtained for temporary bridged financing arrangement for the BMR of bar re-rolling mill.

Company commenced the operations of its new bar mill with a capacity of 430k tons during FY21. The management believes that due to an increase in construction activities and ample anticipated demand, MUGHAL would be able to pass on any raw material price increments to end consumers.

Recently, there has been shift from ungraded to graded steel because of a lower price delta between the two which is a positive for the listed steel companies.

Going forward, the management expects local demand to increase by 5-7% per annum. Company is optimistic that the Mohmand Dam, Diamer Basha dam and other construction activities in different cities of Punjab and KPK will help keep demand of steel intact. Company targets a 20-30% YoY increase in its volumetric sales in the ongoing year.

MUGHAL has been able to sell its copper ingots at a 3% discount in the international market compared to a ~10% discount offered from Pakistan historically. The management expects a strong demand from the international markets for its non- ferrous segment in FY22 as well.

Company is also evaluating the feasibility of aluminium and zinc businesses alongside copper.

The company’s associate, Mughal Energy Limited, is in the process of installing a 36.50MW hybrid power plant which will be catering to the electricity needs of Mughal’s core Steel business.