Mughal Iron & Steel Industries Limited (MUGHAL) – FY15 Result Review

Intermarket Securities Limited.

• Mughal Iron & Steel Industries Limited (MUGHAL) posted NPAT of PkR721mn (fully diluted EPS: PkR6.59) in FY15, up by 85%YoY vs. NPAT of PkR391mn (fully diluted EPS: PkR3.57) in FY14. In 4QFY15 alone, MUGHAL posted NPAT of PkR224mn (fully diluted EPS: PkR2.23), up by 54%YoY/42%QoQ
  (pre-tax basis: +29%YoY/+23%QoQ). Alongside the result, a full and final dividend of PkR0.50/share was announced as well as a 15% bonus issue.
• Improvement in FY15 earnings was primarily attributable to revenues more than doubling to PkR12.24bn, on the back of higher volumetric sales, which countered a 61%YoY increase in finance costs. In this regard, 4QFY15 sales clocked in at PkR4.27bn or 35% of full-year FY15 sales. Somewhat surprisingly, GMs for FY15 shrunk by 1.7ppt YoY to 10.5%.
• Considering robust FY15 growth, MUGHAL’s trailing P/E 9.85x remains modest even after the stock price hit its upper circuit post result announcement. We expect earnings to grow in upcoming years on the back of (i) 7.5MW Induction Furnace coming online in 2QFY16 which will reduce production costs, (ii) BMR of re-rolling mills in 3QFY16 which will reduce manufacturing cost and increase production by 30% and (iii) 55MW coal captive power plant being installed that will meet the complete power needs of the existing capacity.