Karachi, June 07, 2022 (PPI-OT): MUGHAL and ASTL: Projections incorporating macro-developments

We revisit our investment case for MUGHAL and ASTL where we revised our target prices to PkR94/sh and PkR35/sh from PKR140/sh and PkR57/sh for MUGHAL and ASTL, respectively. Incorporating RF of 15.5% and PkR/US$ of 198/210 in FY23/24F.

We expect the earnings outlook for MUGHAL and ASTL to remain dreary in FY23 with the companies expected to see a volumetric decline of 10-12%YoY to 280-340K tons in rebar/girder dispatches for FY23. Likewise, we foresee a decline in EPS to PkR13.12/sh and PkR4.29/sh in FY23 from PkR16.2/sh and PkR7.61/sh in FY22F for MUGHAL and ASTL, respectively.

However, post FY23, we believe industry rebar volumes to register a 3y CAGR of 6% between FY23-26F. Moreover, we have also assumed MUGHAL and ASTL rebar volumes to register a 3yr CAGR of 13.7% and 8.4% between FY23-26F, respectively. We also expect a 3-yr earnings CAGR of 19.9% and 24.3% for MUGHAL and ASTL between FY23-26F, respectively.

Apart from ferrous segment, we expect MUGHAL’s non-ferrous segment to register a 4yr earning/sales CAGR of 8.9/10.7% with an earnings contribution of 57% and avg. GMs of 20.3% between FY22-26F.