ASTL reported earnings of PKR 1.05/sh in 2QFY20 (↑2.8x QoQ), taking 1HFY21 earnings to PKR 1.42/sh. The boost in earnings can mainly be attributed to higher local prices, volumetric growth in steel dispatches and lower financing cost (↓43/17% YoY/ QoQ) in 2QFY21.

Key highlights of the result are summarized below –

During 2QFY21, the company registered higher sales at PKR 9,538Mn up 26/21%, YoY/QoQ due to price increases (↑~3% QoQ), and steel demand originating from construction sector. Thus, the 1HFY21 topline increased to PKR 17,452Mn, up 28% YoY.

Resultantly, the company registered higher gross margins at 10.8% in 2QFY21 compared to 7.9% in 2QFY20 and kept the 1QFY21 margins stable. This translated into higher gross profits at PKR 1,028Mn, up 73/19% YoY/QoQ.

The distribution expense moved in line with sales and registered an increase of 55/21% YoY/QoQ to PKR 243Mn. While the administration expenses increased by 9/23%, YoY/QoQ to PKR 142Mn.

Major variance was also witnessed in other expenses and allowance for credit loss. The other expenses increased to PKR 26Mn, up 4.0/2.5x YoY/QoQ. On the other hand, the allowance for expected credit losses showcased massive improvement and posted reversal to PKR 58Mn.

Finance costs declined to PKR 381Mn, down by 43/17% YoY/QoQ owing to lower interest rates and debt levels.

We have a HOLD call on ASTL with Dec-21 price target of PKR 48.0/sh.

Courtesy – BMA Capital Management Ltd.