Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Mughal Iron & Steel Industries Limited at 'A+/A1' with a 'Stable' outlook. The medium to long-term rating indicates good credit quality with adequate protection factors, while the short-term rating reflects a strong likelihood of timely repayment of obligations.
According to VIS Credit Rating Company Limited, Mughal Iron & Steel Industries Limited, established in 2010 and listed on the Pakistan Stock Exchange, operates in both ferrous and non-ferrous segments. The company, headquartered in Lahore, focuses primarily on manufacturing and selling mild steel products, with facilities located on Sheikhupura Road and sales centers at Badami Bagh in Lahore.
The ratings consider the business risk profile of Pakistan's steel bar industry, which is marked by high cyclicality, reliance on imported materials, and significant energy consumption. Challenges include demand fluctuations tied to the construction sector, currency depreciation, and competitive market conditions. Despite government infrastructure spending providing some support, demand remains volatile due to economic cycles and inflationary pressures.
The company's financial performance has shown revenue growth in both segments, driven by pricing and volume increases. However, gross margins have been impacted by input-cost inflation, currency depreciation, and energy expenses. While liquidity remains adequate, there has been a slight contraction in key metrics. Increased debt utilization has raised capitalization levels, though coverage metrics show pressure from reduced operational income and higher interest costs. Management expects to meet near-term obligations through current liquidity, with improvements anticipated from enhanced exports and cost efficiencies from captive power generation.
Future ratings will be sensitive to the company's ability to improve profitability margins, manage debt service coverage effectively, and maintain adequate liquidity ratios under high interest costs.