We reinstate our coverage on Amreli Steels Limited (ASTL) with a DCF based TP of PKR46/sh translating into an upside of 25% from last market close. Our BUY stance emanates from lower international scrap prices, uptick in product demand and shrinking financial charges.

The outlook of construction sector has improved considerably post introduction of construction package by the government. Whereas ongoing hydel projects and Naya Pakistan Housing Scheme is expected to provide further impetus to demand.

On the international front, lower international scrap prices (down 10% CY20TD) is likely to bode well for the sector. Furthermore, recent revision in reference rate (down by USD59/Ton) by FBR is estimated to aid gross margin accretion going forward.

With stock depicting price run up of 13% during the week, ASTL offers an upside of 24% to our Dec’20 TP of PKR 46/sh from current levels. The stock is currently trading at FY21E P/E and P/B of 9.63x and 0.98x. (BMA Capital Management Ltd.)