Topline Securities organised the Pakistan Mid Cap Conference 2025. The third session of Day 2 focused on MUGHAL Iron & Steel (MUGHAL), with Mr. Shakeel Ahmad, the Chief Operating Officer of MUGHAL, serving as the keynote speaker.
MUGHAL Iron & Steel expects the BMR of the re-rolling mill to be completed by 1Q2026.
According to management, the proposed budget for FY26 is very positive for the construction sector. An increase in the sales tax for FATA/PATA to 10% could add approximately 50,000 to 60,000 tons per month back to the formal long steel market. Currently, around 50,000 tons per month, totaling 600,000 tons annually, are being dumped in the northern regions of Punjab and KPK from FATA/PATA.
The combination of increased sales tax for FATA/PATA and higher transportation costs in that region will enhance the competitiveness of manufacturers based in Punjab and KPK. Management projects that the formal long steel industry could grow by 10% solely due to the imposition of the sales tax in FATA/PATA. MUGHAL has a distinct regional market, making it largely unaffected by this dumping issue.
Another positive development for the construction sector is the removal of the Federal Excise Duty (FED) on the purchase and transfer of property, which is expected to revive construction activity. The duty on steel scrap has decreased from 5% to 4%, and the Additional Customs Duty (ACD) has been reduced from 2% to 0%. This results in a total duty reduction of 3% on scrap, which will benefit the company’s profit margins.
Currently, management has halted production in the Non-Ferrous (Copper) segment for various reasons and is focusing on the Ferrous segment. One reason for stopping production in the Non-Ferrous segment is the decline in international copper prices from US$1,000-1,100 per ton to the current range of US$800-900 per ton. Another significant factor is the growing demand for the Ferrous segment in the southern parts of the country, allowing the company to offset losses in the Non-Ferrous segment through increased volumes in the Ferrous segment.
The Mughal Energy coal project is expected to be operational by the end of 1QFY26. Once completed, the company’s total installed power capacity will be approximately 160 MW, which includes 100 MW from grid power, 7-8 MW from solar power, 25 MW from gas power, and 36 MW from coal power. Currently, the company’s energy cost stands at Rs 36 per kWh, primarily sourced from the grid.
After September 25, energy costs are projected to decrease to Rs26-28 per kWh, with coal generation estimated at Rs21-22 per kWh. Lower margins in the Ferrous segment are attributed to higher energy costs, which are expected to improve with enhanced efficiency of the coal plant. Additionally, the company anticipates substantial benefits from reduced finance costs due to lower interest rates.
Courtesy – Topline Securities
