MUGHAL is scheduled to announce its 2QFY23 result on Monday

MUGHAL is scheduled to announce its 2QFY23 result on Monday, where we expect the company to record NPAT of PkR812mn (EPS: PkR2.42), down by 7%QoQ vs NPAT of PkR872mn (EPS: PkR2.60) in the previous quarter. It is worth noting that the resilience in earnings is majorly attributed to readily available low-cost scrap inventories from the previous quarter, which helped to offset some of the challenges associated with supply chain and raw material procurement issues. Although, strict COVID related lockdowns in China may have impacted offtakes of the non-ferrous segment, where we expect a decline of 30% in the said segment, for this reason, gross margins for the quarter to clock in at ~13.9% for the period vs. 14.8% from the quarter before.

Overall, wrenching supply chain and import issues alongside a broad based economic down-turn (LSM: -3.68% during 6MFY23) continues to impact the overall sustainability of the Steel/Engineering sector where-in finished long-steel prices currently stand north of PkR300k/ton (up by 46% vs. the previous quarter). Therefore, it will be important to keep an eye on how the company manages these challenges in the near-term. The company currently trades at a forward P/E of 2.9x with our TP of PkR65/sh providing a capital upside of 35% from the last close – Buy.

Courtesy- AKD Research

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