The flat steel industry’s volumes increased by 32% YoY to 1,295k tons in FY21, wherein 624k tons is attributed to coated steel (galvanized and colour-coated). Sales volumes of ISL are up by 18% YoY to 492k tons in FY21.
CRC product applications are in sectors like (1) Automotive, (2) Electrical goods, (3) Packaging Drums, (4) Electric/Home Appliances, (5) Telecom, (6) Construction and (7) Agriculture, amongst others.
Significant customers of the company are (1) Yamaha, (2) Pak Elektron, (3) Dawlance, (4) Atlas Honda, and (5) Loads Limited, amongst others.
ISL is expanding its production capacity by 120k tons to 350k tons through the debottlenecking process. The total CAPEX of the project is Rs1.23bn and will be financed with a combination of debt (TERF and LTFF) and equity. The plant is expected to start commercial operation in 3QFY22. To note, ISL’s capacity utilization for FY21 stands at ~85%.
ISL is also finalizing the technical study of setting up a Hot Strip Mill in Pakistan. The initial designed annual capacity of the plant would be 1.2mn tons. Phase-1 of the project is expected to take 27 months, starting from board approval.
Revival of Pakistan Steel Mills (PSM) is not a significant threat to ISL’s Hot Strip Mill as the quality that PSM can produce is not required by the domestic industry. Furthermore, ISL can produce up to 500k tons vs domestic demand of 2mn tons, which is insignificant.
Effective today, ISL has increased their prices by Rs4,000/ton. This takes 1mm thickness CRC and HDGC price to Rs204,500/ton and Rs211,850/ton, respectively.
During FY21, 20% of net profit came from inventory gains. Currently, ISL holds the inventory of 1.5 months vs the previous trend of 3 months which will reduce the cost of working capital.
Exemptions of sales tax explicitly given to production in FATA/PATA are critical challenges for the company.
Furthermore, SRO 655 enables the auto industry to import duty-free CRC/GC, rendering the domestic steel industry unviable. To highlight, 20% of total sales of ISL are diverted towards the auto industry.
Post budget duties on import of HRC for ISL remains unchanged at 5%. To highlight, ISL import the majority of its HRC from Japan.
The company has started a service centre on 15 Acres of land at Port Qasim to provide a ‘cut to length’ facility to consumers.
Courtesy – AHCML Research