Roshan Maeeshat Electricity Scheme places ASTL in an advantageous position

IMS Research has published a report on the performance of Amreli Steels Ltd. for the period from July to September 2025. The company saw operating losses continue. Amreli Steels Limited (ASTL) posted an NLAT of PKR790mn (LPS: PKR2.66) for 1QFY26, an improvement from the loss of PKR992mn in SPLY. The result was better than our expected LPS of PKR3.94, primarily due to higher-than-expected gross margins. Additionally, in a separate notice to the board, management announced an extension of the suspension of business operations at the SITE plant for another six months, as the Dhabeji facility’s capacity remains sufficient to meet demand.

Key highlights from 1QFY26:

§ Net sales stood at PKR2.8bn, down 12% QoQ and 34% YoY, significantly below our estimate of PKR3.5bn, where we had expected a sequential increase driven by improved construction demand (cement sales up 8% QoQ). The YoY decline is mainly attributable to the loss of market share as plant operations remained limited amid working capital constraints.

§ Gross margins were recorded at 0.7%, compared to 5.4% in SPLY. The 4.7ppt decline in margins was mainly due to lower fixed cost absorption, as production remained minimal amid ongoing debt restructuring discussions with banks, which concluded on September 24.

§ Distribution expenses fell 36% YoY to PKR103mn, in line with the decline in sales.

§ Other income rose 2.8x YoY to PKR70mn, as the cash balance increased 5.6x to PKR4.2bn (PKR14/sh), owing to the suspension of debt and interest payments during restructuring negotiations.

§ Finance costs came in at PKR873mn, down 28% YoY, as lower interest rates provided much-needed relief to the bottom line.

§ Similar to last year, the company booked a tax reversal of PKR299mn, without which the LPS would have been higher by PKR1.01.

Lower interest rates have provided some relief to ASTL’s bottom line; however, limited operational capacity continues to result in minimal fixed cost absorption, leading to ongoing operating losses. Operations are expected to ramp up following the conclusion of debt restructuring, which is expected to drive revenue growth as the company regains lost market share.

Furthermore, the recently announced Roshan Maeeshat Electricity Scheme places ASTL in an advantageous position, as capacity utilization remained low last year. Any incremental consumption this year should therefore qualify for discounted tariffs, potentially resulting in a savings of PKR 1.86 per share.