MUGHAL has posted 3QFY24 NPAT of PKR103mn

MUGHAL has posted 3QFY24 NPAT of PKR103mn (EPS: PKR0.31), down 92% YoY and 87% QoQ. The result was significantly lower than our expected EPS of PKR 1.85, where the deviation stemmed from lower gross margins than expected. This result brings the 9MFY24 NPAT to PKR 1.4bn (EPS: PKR4.15), down 47% SPLY.

Key takeaways from 3QFY24 result include:

  • The company reported revenue of PKR21.1bn, up 22% YoY but down 16% QoQ. The revenue came in lower than our anticipated figure of 23.4bn, which is due to weak performance from the nonferrous segment.
  • Gross margins contracted to 6.7%, reflecting a decrease of 3.3 ppt QoQ and 12.2ppt YoY. This sequential contraction in margins is attributed to rising scrap prices and an increase in grid prices, in our view. We had expected gross margins of 10.7%
  • Finance costs were recorded at PKR1.74bn up 71% YoY and 27% QoQ. The sequential rise in finance cost is due to increased reliance on ST-borrowings during the quarter.
  • Among other line items; i) admin expenses increased 8% QoQ and 10% YoY to PKR217mn, primarily due to an increase in salary expenses, and ii) the company booked a tax reversal of PKR628mn during the quarter due to reversal of deferred taxation. 

MUGHAL has reported a disappointing quarter with weak margins and elevated finance costs leading to a loss before tax of PKR525mn. While steel demand outlook is muted, copper exports to China and potential monetary easing later in the year offer positives. Moreover, the company’s strategy to list Mughal Energy Limited on the GEM board of PSX to raise funds for a coal-fired power plant aims to reduce reliance on the grid. We uphold a BUY rating on the stock with a target price of PKR80/sh.

Courtesy – IMS Research 

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