Karachi, January 11, 2022 (PPI-OT): MUGHAL: Leading the pack

We reiterate MUGHAL being attractive as our Dec-22 Target price (TP) of Rs170/share offers an upside of 56% from current levels. Rapid urbanization, government’s focus on development projects, upcoming dam constructions and industrialization are some of the primary stimulants for long steel demand in the country.

Company has recently announced to install a melting plant and feedstock processing unit with an estimated CAPEX of Rs2.9bn which will increase the capacity of its non-ferrous segment leading to higher exports. We have incorporated the impact of the new segment in our estimates.

Strong demand from the international markets for non- ferrous segment is expected in 2HFY22/1HFY23. The company’s revenue from copper exports is expected to continue with full swing as higher copper prices are expected to persist in the near to medium term given the global focus toward EV and hybrid vehicles and increased demand for semiconductors and plugs.

Our forecast indicates an EPS of Rs21.6 for FY23 and we expect earnings to grow at a 5-year CAGR of ~80%. High CAGR is fuelled by volumetric growth post commencement of newly installed bar mill, BMR of existing rolling mills and incremental support from the Non-ferrous segment including the newly announced Aluminium segment.