The annual results of the steel sector are around the corner, where we expect the BMA Steel universe to post earning of PKR 19.69Bn in FY21 compared to negative earnings of PKR 0.66Bn in SPLY. Improvement in profitability is expected mainly because of higher steel production (LSM FY21E ↑18% YoY), economic revival and upbeat steel prices (Rebar/CRC ↑33%/35% YoY).

The gross margins across the industry are estimated to increase to 17.2% in FY21 from 8.5% in FY20, mainly on account of higher demand from the construction, auto and appliance sector boom.

Company wise; MUGHAL, ASTL, ISL and ASL are expected to post an EPS and DPS of PKR 12.8/4.3/17.9/8.9 and 4.5/1.5/7.5/1.0, respectively.

Our top picks for the sector are MUGHAL and ISL, with Jun 22 TP of 135/sh and PKR 116/sh, respectively.

Courtesy – BMA Capital Management Ltd