Mughal Iron and Steel Industries Limited (MUGHAL) released their annual financial results on Sept 17. The company reported PAT of PKR 3.43Bn (EPS: PKR 11.8) in FY21 (↑5.8x YoY) and PAT of PKR 920Mn (EPS: PKR 3.2) in 4QFY21 (↑4.7x/↓17% YoY/QoQ). Higher long steel prices, new copper ingot venture and volumetric growth in dispatches led to higher profitability in FY21.

Furthermore, The company announced 15% bonus shares along with the result. Major highlights of the result are summarized below: –

MUGHAL posted net sales of PKR 44.97Bn (↑65% YoY) on the back of higher ferrous/non ferrous steel prices and dispatches in FY21. The net sales for 4QFY21 also showcased a massive increase of 159/46% YoY/QoQ to PKR 15.15Bn due to higher copper ingot and long steel prices.

The gross margin improved to 14.9% in FY21, compared to 9.6% in SPLY. The margins improved due to inventory gains made through upbeat global commodity prices and new venture of copper ingots. As a result, gross profit for FY21 clocked in at PKR 6.70Bn (↑156% YoY). The gross margin in 4QFY21 faced a severe pressure and declined to 12.5% (↑1.7/↓8.7 ppts YoY/QoQ), which maybe due to higher scrap prices and lower inventory gains.

The sales and marketing expense increased by 77% YoY to PKR 254Mn to support higher top line during FY21. Moreover, the administration expenses increased to PKR 538Mn, up 32% YoY.

Financial charges were reported at PKR 1.37Bn in FY21, a decline of 10% YoY due to lower interest rates.

We have a BUY call on the scrip with Jun’22 target price of PKR 135/sh, offering an upside of 21% from the last close.

Further analysis will be done once detailed results are out.

Courtesy – BMA Capital Management