PACRA Upgardes Entity Rating of Mughal Iron and Steel Industries Limited

Lahore, October 26, 2020 (PPI-OT):Mughal is a known name in the steel industry. The Company’s business profile has significantly improved, over the last few years. Governance framework strengthened by induction of independent oversight on board. The Company has diversity in its product slate; Rebars, T-Iron and Girders etc. Furthermore, establishment of strong brands like ‘Mughal Supreme’ gives competitive edge to the Company. The company has attained formidable market share by penetrating retail segment. The strategic realignment executed over the last few years by channeling 60% volumes (previous: 10% of sales mix) to retail market has been fruitful.

The capacity expansion project, achieving CoD in few months, will further enable Mughal to increase its efficiency and market presence. The reported profitability of FY20 shows Mughal is holding its position. Durable output was reported with the decline in profitability due to increased finance costs. Margins witnessed slight reduction, an industry wide phenomenon, primarily attributable to global increase in prices of raw material (scrap, iron) and depreciation of Pak Rupee.

The ratings incorporate the essence of material advancement that the company has achieved in terms of further diversity in revenue streams, which will add not only to the top line but also enhanced profitability, going forward. The management is eying to further improve capacity utilisation for upcoming months. Covid-19 has posed challenges to almost all segments of the economy, worldwide and domestically, where negative implications are being observed on steel sector. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. However, Mughal’s performance is expected to remain strong.

The Company is planning to issue a Sukuk of PKR 3,000mln which will be used for meeting working capital requirements. This along with declined key policy rate will result in material savings in upcoming years. Going forward, vigilant management of working capital and proper channeling of additional capacity are essential to support comfortable repayments. The ratings take comfort from decades long association of the sponsor family with steel and allied business.

The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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