Mughal Iron & Steel Industries Ltd (MUGHAL) held its analyst briefing recently to discuss 1HFY25 financial results and future outlook:
- The company’s topline was PkR46.8bn in 1HFY25, up 1% YoY, primarily due to higher sales volumes.
- Gross margins declined to 9.0% during 1HFY25 (vs. 10.9% in 1HFY24) due to declining finished product prices. Additionally, elevated finance costs, which stood at PkR3.5bn (up 17% Yoy) during the half-year, dragged half-year earnings down to PkR217mn (EPS: PkR0.65).
- Average capacity utilization remains elevated, with smelting and re-rolling operations currently running at 80% and 65–67%, respectively, which are at maximum optimal capacity. The production mix for rebar and girders stands at 60% and 40%, respectively.
- Management expects the overall industry dynamics to remain largely stable through CY25, with no major shifts anticipated or demand outlook (annual demand: 4.5-5.5m tons). Moreover, management expects demand to increase next year due to large-scale GoP infrastructure projects.
- Southern players’ curtailment of output has mitigated the risk of oversupply in the domestic market. Against this backdrop, management is keen on capitalizing on the South’s girders and section markets.
- With regard to U.S. tariffs, management remained positive and stated that steel and aluminum commodities were not explicitly targeted in the recent announcements, as the U.S. is a net importer of 20 million tons of long-rolled products.
- The 36.5MW coal-based captive power plant is currently undergoing boiler hydro-testing, and management anticipates commissioning by June’25. The generation tariff, including capacity charges, is expected to be PkR24/kWh.
- Management estimates that commissioning the coal captive plant will translate to a bottom-line savings of PkR1.8-2.0bn annually, due to ~ a PkR10/kwh saving in power costs compared to the grid tariff of PkR35–38/kwh.
- After the commissioning of the coal captive plant, management anticipates a complete shift of operations towards it due to cost-effective fuel sources, namely local coal and biofuel.
- International copper prices have corrected by ~20% from their peaks due to heightened price competition in EVs globally and sluggish demand from China, the major consumer.
Courtesy – AKD Research
