Equity Analysis /

Mughal Iron & Steel Industries: FY18 review – weaker sales countered by lower ETR, results inline

    Intermarket Securities
    19 September 2018

    Mughal Steels (MUGHAL) posted 4QFY18 NPAT of PRs343mn (EPS: PKR1.36), up 30%yoy/5%qoq, inline with our estimated EPS of PKR1.34. This takes FY18 profits to PKR1,290mn(EPS: PKR5.13) , up 30%yoy. The company also announced a final dividend of PKR2.20/sh

    During 4QFY18, net sales grew by only 1% yoy to PKR 5,606mn potentially due to slow construction activities during (Ramadan month and caretaker government setup). Gross margins declined sequentially to 12.1% from 12.7% in 3QFY18 on account of higher scrap prices. The company recorded ETR of 5% in line with its ongoing BMR activities.

    In FY18, the company recorded 18% yoy increase in net sales to PKR22,226 mn due to higher construction activity and rising rebar prices. Gross margins improved to 12.6% from 10.2% on the back of in house billet manufacturing (as procuring billets became expensive)

    Along with FY18 results, the company also announced that the completion time in its ongoing expansion in respect of rerolling mill has been delayed till 4QFY19, from 2QFY19 announced earlier.

    Our Jun’19 TP of PKR80/sh implies a Buy stance where we await detailed accounts and management guidance before updating our estimates.