Karachi: Crescent Steel and Allied Products Limited (CSAP), a key player in the production of coated steel line pipes and cotton yarn, has witnessed substantial growth, reporting a net profit after tax (NPAT) of PkR1.6 billion for FY24, a significant increase from PkR0.18 billion in the same period last year.

According to AKD Securities Limited, this surge in profitability is primarily driven by the company’s strategic shift towards the bare and pre-coated pipes business, which has seen remarkable demand, especially in the gas and water infrastructure sectors. Gross revenues have doubled year-over-year, reaching PkR9.1 billion, compared to PkR4.5 billion in FY23, largely fueled by sales associated with these sectors.

CSAP’s specialization in manufacturing large diameter spiral pipes and pipe coatings has notably enhanced its market position. This is largely due to its involvement in the K-IV water line project (Phase-1), where the supplier of the raw material, CHEC, also acts as the contractor. This synergy allows CSAP to mitigate risks associated with volatile commodity prices and exchange rates by treating raw material costs as pass-through expenses, thereby focusing on revenue generation through the conversion and coating process.

The company’s gross margins have improved significantly, rising to 29% in FY24 from 17.2% in the previous year. The extension of CSAP’s contract with CHEC until the second quarter of FY26, increasing the original order value to PkR8.6 billion from PkR5.9 billion, underscores the sustained demand and the strategic importance of the K-IV project. Furthermore, CSAP has also successfully completed a PkR2.0 billion order for SSGC, delivering 24-inch coated steel line pipes.

With the nearing completion of Phase-1 of K-IV and ongoing developments in Phase-2, there is a strong likelihood of continued governmental commitment to fund this vital infrastructure project, ensuring a robust revenue stream for CSAP in the medium term. However, potential risks such as a deteriorating liquidity situation in the gas sector, reductions in Public Sector Development Program (PSDP) investments, and volatile exchange rates could impact future profitability.