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Pakistan Steel industry likely results in 2QFY25

IMS Steel Universe is expected to report a cumulative NLAT of PKR250mn for 2QFY25, compared to an NLAT of PKR836mn in the previous quarter –driven by increased volumes and lower interest rates. Revenues are projected to improve by 11% QoQ but decline 24% YoY to PKR43.5bn. The sequential increase is driven by higher construction activity, as indicated by a 23% QoQ rise in domestic cement sales.

Finance costs are expected to drop 22% QoQ to PKR2.7bn because of a 450bps reduction in interest rates during the quarter (on top of 450bps earlier), with the largest beneficiary being ASTL.

ASTL: Losses projected to extend further

Amreli Steel Ltd. (ASTL) is expected to report an NLAT of PKR767mn for 2QFY25 (LPS: PKR2.58), a slight improvement over the NLAT of PKR992mn in the previous quarter (LPS: PKR3.34). ASTL’s performance has been severely impacted by a loss in market share due to ongoing debt restructuring, leading to the temporary shutdown of its SITE rolling mill, which accounts for 30% of total capacity. Revenues are expected to decline 56% YoY in 2QFY25; however, improved construction demand (domestic cement sales up 23% QoQ) is anticipated to drive a 17% QoQ increase in revenues to PKR4.9bn, despite a 5% decline in rebar prices. Gross margins are expected to remain stable at 5.5%, as better fixed cost absorption will offset the impact of softer prices. However, ASTL will likely continue posting operating losses, exacerbated by elevated finance costs, projected at PKR900mn (down 25% QoQ) despite lower rates. ASTL is expected to face challenges until clarity emerges on debt restructuring, though rising construction demand and lower interest rates will provide relief to the bottom line.

Mughal: Demand challenges persist

Mughal Iron & Steel Industries Ltd is projected to post a 2QFY25 NPAT of PKR265mn (EPS: PKR0.79), compared to a LPS of PKR0.07 in the previous quarter. Revenues for 2QFY25 are estimated at PKR24.4bn, up 13% QoQ but flat YoY, driven by improved construction demand, similar to ASTL. Gross margins are expected to contract by 1.4ppt due to lower steel prices during the quarter. While ferrous margins are anticipated to decline, non-ferrous margins will likely remain stable owing to flat copper prices QoQ. Finance costs are projected to decrease sharply by 23%, providing relief to the bottom line. Mughal’s 36.5MW captive power plant, expected to come online in 2HFY25, should enhance gross margins in the ferrous segment.

ISL: Margin contraction to drag bottom line

International Steels Ltd. (ISL) is expected to report a NPAT of PKR252mn (EPS: PKR0.58), reflecting a 41% QoQ improvement but a significant 80% YoY decline. Revenues are projected at PKR14.2bn, up 5% QoQ, driven by higher prices of CRC (up 5% QoQ) and HDGC (up 10% QoQ). Volumes are expected to increase slightly, supported by strong sales of two-wheelers, though this will be partially offset by weaker rural demand and flat white goods sales. Global CRC-HRC prices have improved by 13% during the quarter, which is expected to lift the company’s gross margin by 2ppt QoQ to 8.7%. Domestic demand is expected to pick up in 2025, driven by lower interest rates and recovering purchasing power. We expect ISL to announce an interim dividend of PKR1.0/sh.

Courtesy –  IMS Research

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