MUGHAL announced its 4QFY24 recently, where the company recorded an unconsolidated profit of Rs608mn (EPS of Rs1.81), a 27% decline year over year. The result came in-line with expectations in 4QFY24. Alongside the result, the company did not announce any cash dividend, which was below industry expectations.     

The company recorded gross margins of 5.1% in 4QFY24, compared to 6.7% in 3QFY24 and 16.2% in 4QFY23.

According to our channel checks, gross margins are lower QoQ and YoY due to the inability to pass on higher production costs, mainly power costs.

To recall, Scrap-Rebar spreads were also lower on a YoY and QoQ basis in 4QFY24. It was recorded at an average of US$136/ton in 4QFY24 compared to US$152/ton and US$197/ton in 3QFY24 and 4QFY23 respectively.

Net Sales increased by 34% year over year and by 20% quarter over quarter to Rs25.2bn. The quarter over quarter increase in sales is due to the seasonality impact.

Finance costs in 4QFY24 increased by 10% YoY to Rs1.67bn mainly due to higher interest rates.

MUGHAL recorded a tax reversal of Rs1.02bn in 4QFY24 compared to a tax expense of Rs534mn in 4QFY23. In FY24, MUGHAL posted a profit of Rs2.0bn, a 43% decline YoY compared to a profit of Rs3.48bn in FY23. Gross margins in FY24 stood at 8.4% compared to 14.4% in FY23. Pressure on margins was due to local market competition dynamics and lower international spreads.

MUGHAL is currently trading at an FY25E PE of 6.6x and a Dividend yield of 4%.

Courtesy – Topline Pakistan Research