Karachi, April 13, 2023 (PPI-OT): MUGHAL: Attractive entry point

Most of the manufacturing sector witnessed significant slowdowns in the first half of FY23 majorly on the back of sharp currency depreciation (inducing higher RM prices and exchange losses), supply chain disruptions (import bans/restrictions) and overall inflated commodity prices in the international market.

Overall, the long-steel industrial volumes are expected to close FY23 around 5.2mn tons (FY22: 6.4mn tons), down 18% YoY, with Mughal expecting to enhance market share to 5.25% (4.9% in FY22).

The contribution of the non-ferrous sales to the total revenues has grown exponentially in previous two years, with export revenues accounting for as much as 20% during FY22 (1.5% back in FY20).

Since the company has indicated that it is targeting to diversify its non-ferrous portfolio (aluminium) and add other base metals (zinc) in it, we expect the contribution from non-ferrous division to increase significantly in the years to come.

Overall, MUGHAL remains our top pick in the long steel sector with a Dec-23 target price of PkR73/share on the company, offering an upside of 48% from last close, based on a WACC of at 26% (RF/Rm: 21%/9%) and terminal year of FY28 (terminal growth of 4%)