Mughal Iron & Steel Industries Ltd (MUGHAL) – Key Takeaways

At the Topline Pakistan Mid Cap Call Conference 2024 second session on Mughal Steels Limited (MUGHAL), the key speakers were Mr Muhammad Zafar Iqbal, CFO, MUGHAL. MUGHAL’s copper business, a significant contributor to its revenue, maintains an average gross margin of 24 to 25%, with a range between 20% to 28%.

The company’s total electricity requirement is between 150 MW and 155 MW. The requirement per ton is 8kW. 100 MW is sourced from the grid, and 25 MW from a captive gas plant.

MUGHAL is strategically planning to enhance its energy generation capabilities by installing a 36.5 MW coal plant at a cost of Rs6.5bn. This ambitious project will be financed by a Rs2.0bn sukuk issue, Rs1.5bn through banks, and the remaining amount from sponsors.

There is an Rs18-20 per kWh difference between the discos rate and coal-based generation. The cost of coal-based generation is Rs30-32 per kWh, whereas the discos rate is Rs50-52 per kWh.

The steel sector’s market size used to be 7.0 million tons, but it has decreased in the last two years to 4.5 million tons. Punjab holds a 60% market share of the steel sector.
Management expects the market to remain at its current level with a slight growth of a few hundred tons for FY25.

Capacity utilisation for the company is between 70% and 75%.

Management does not expect the tax exemption granted to the FATA/PATA regions to be removed in the upcoming budget.

FATA/PATA regions contribute 100,000 tons per month and fulfill 20% of the country’s demand, and according to management, this will continue to be an issue.
The sugar sector has been in the steel market for the last 10 years, and this development has recently received attention. Management considers any future entry of sugar sector players into the steel sector to be positive as they will bring new technologies.
Courtesy: Topline Research