Mughal Iron & Steel Industries Ltd (MUGHAL) held its analyst briefing earlier today to discuss FY24 financial results and future outlook:

·         Company achieved a record topline of PkR92.4bn in FY24, up by 37%YoY, with the growth primarily driven by higher sales volumes.

·         Gross margins declined sharply to 8.4% in FY24 (vs. 14.4% in FY23), due to declining finished product prices and rising energy costs during the year. Additionally, the burden of higher financing rates further impacted profitability, shrinking to PkR2.0bn (EPS: PkR5.96), down 43%YoY.

·         Re-rolling production volumes reached 245.6k MT in FY24, reflecting a 30%YoY increase. Meanwhile, non-ferrous production volumes stood at 570k tons for melting and 56k tons for recycling.

·         International prices of copper have corrected by US$1,000/ton during the past month. However, cost of compressor scrap, a primary input, fell in tandem, mitigating the impact on margins.

· Management expects a recovery in local market volumes moving forward, noting that the company has successfully maintained its share in the market domestically despite turbulent conditions faced by the steel sector.

·         Management has indicated that discussions are underway between the IMF and authorities regarding a construction package aimed at stimulating the economy, aside from PSDP.

·         The company completed the acquisition of Mughal Energy Ltd (MEL) last year, a 36.5MW coal-fired captive power plant, to serve as a primary energy source. The fuel mix will comprise 50%/50% of imported coal and alternative sources, with a generational efficiency of 35%.

·         Management reaffirmed plans for a non-ferrous recycling plant with a nameplate capacity of 120k tons. The plant is expected to operate at an initial annual capacity of 80k-90k tons.

·         The planned BMR for next year aims to upgrade the existing re-rolling facility into a dual-purpose rolling mill, enabling the production of both rebars and mini/medium sections interchangeably.

·         Yield of aluminum from motor scrap ranges between 5-15%, depending on various factors, with the finished products consisting of aluminum granules and ingots.

·         Regarding copper volumes, management remains committed to maintaining quality and yield standards in procuring compressor/motor scrap. Hence, growth in volumes remains modest despite the company having ample capacity.

·         Management dismissed the possibility of the company acquiring a sugar mill, citing concerns about the viability of simultaneously operating a steel plant and a sugar mill.

·         Industry’s average import supply chain time has doubled to ~80 days. However, the company has managed to keep this duration to 40-45 days through supplier relationships and strategic procurement practices.

Courtesy – AKD Research