Aisha Steel Mills Ltd (ASL) has posted a NPAT of PKR1.8bn (EPS: PKR1.92) for 2QFY21, compared to a NLAT of PKR81mn (LPS: PKR0.16) same period last year.
Key Highlights of 2QFY21
ASL posted revenues of PKR14.2bn in 2QFY21 vs. PKR11.3bn SPLY, led by (i) local flat steel demand rising to pre-pandemic levels (ii) increase in ASL’s market share to 36% due to decrease in imports, and (iii) higher realized prices due to increase in global CRC prices.
Gross margins saw a massive jump of c.16ppt yoy to 22% due to improved CRC-HRC margins of c.US$120/ton this quarter compared to c.US$80/ton in the previous quarter. In addition to better spreads, higher capacity utilization also contributed to the improvement of gross margins.
Finance costs declined to PKR260mn from PKR443mn in previous quarter (down 170%) due to lower interest rates.
CRC and HDGC are each 50% of the total sales volume. HDGC share has increased due to the boom in construction industry (which constitutes c.35% of total demand of HDGC).
Business performance and Outlook
Management expects local flat steel demand to reach pre-pandemic levels of 1.1mn tons pa in FY21 and increase at about 10% pa in the next 3-5 years.
Prices of flat steel products in the local market are likely to increase due to high CRC-HRC spreads (likely to stay at present high levels of c.US$120/ton), where increase in the prices of HRC has not yet been fully passed on to consumers.
According to the management, total volumetric sales in FY21/22 will be c.400,000 tons and 500,000 tons respectively.
ASL is aiming to increase its export volumes, which are presently at only c.12,000 tons a year, and have received positive interest from various countries. In addition to this, ASL also aims to break into the car skin market, as presently all car skins are imported and new car manufacturers entering the industry provide an opportunity for ASL to enter this market.
ASL is presently trying to persuade the FBR to remove SRO 641 (which prohibits local flat steel producers from selling CRC to local pipe producers). The removal of SRO 641 will cause a substantial increase in demand for ASL and other local flat steel producers.
The case proceeding of anti-dumping duty on flat steel imports from South Korea, European Union, Taiwan and Vietnam have started and any positive outcome will reduce imports from the aforementioned countries.
Courtesy – Intermarket Securities Limited.