MUGHAL has posted a decent result, although slightly lower than our expectations, mostly due to increase in input costs (scrap, ferro-alloys and utilities).

Copper segment margins are likely to remain healthy in the coming quarters amid strong demand for copper globally, which is likely to keep copper prices elevated, in our view. However, increase in price gap of graded and ungraded rebars and PKR3,000/ton (net) decline in rebar prices in 3Q is likely to pressure margins in light of moderating inventory gains, in our view. But, an uptick in construction activity and subsidized loan disbursements are likely to keep long steel volumes healthy in FY22, while enhanced copper flows will positively contribute to the bottom-line.

We have a Buy stance on MUGHAL with a June 2022 TP of PKR135/sh.

Courtesy- Intermarket Securities Limited