MUGHAL is scheduled to release its 4QFY23 earnings sometime in August, where the company is expected to post a PAT of PkR597mn (EPS: PkR1.78) vs. PkR1.30bn (EPS: PkR3.89), falling by 54%/43% on a QoQ/YoY basis. The aforementioned decline in PAT on a quarterly basis is majorly due to lower GMs (14.0% vs. 18.9% in the quarter before) alongside implementation of retrospective super tax, pushing effective taxes upwards to 47% vs. 32% during 3QFY23.

Furthermore, escalating finance costs (up 22%/46% QoQ/YoY) due to overall increased interest rates during the period alongside company’s high working capital requirements, continued to burgeon the already beat down bottom line. On the volumetric front, we have assumed slight growth of 8-10% in volumes during the quarter majorly due to resurgence of LSM activity (up 6.4%/1.0%MoM during May/June’23) alongside easing of import restrictions during the period. To note, domestic prices of long products averaged at PkR260k/ton, where-in they peaked over PkR300k/ton during the quarter before.

On the export front, slow Chinese demand amidst struggling economic activity post COVID lockdowns is expected to keep non-ferrous volumes in check, where-in we have assumed relatively unchanged copper ingot volumes during the period. The company currently trades at FY24 P/Ex of 4.5x with our TP of PkR72/sh providing a capital upside of 37% from the last close.

Courtesy – AKD Research