MUGHAL: Upbeat gross margin lifts profitability

February 19, 2021 (MLN): Mughal Iron & Steel Industries Limited (MUGHAL)  witnessed a sharp rise in net profits by 3.8x YoY during 1HFY21 to Rs 1.398 billion with Earnings per share EPS of Rs 5.56/sh, compared to Rs 366.48 million (EPS: Rs 1.46) in the corresponding year last year.

The result is also accompanied with a dividend of Rs3.0/sh and the right issue of 16% at a premium of Rs58/sh that will allow company to generate Rs2.7 billion to retire its long term debt taken for BMR of re-rolling mill

The accretion in the company’s bottom line can be attributed to higher volumes due to strong demand from the private sector due to construction sector momentum, better rebar retention prices, and increased contribution of copper ingots export business.

During the period, company Net sales jumped significantly by 38% YoY largely due to increase in vumetric sales and higher retention prices. The gross margin of the company improved to 13% from 10% owing to a sizeable increase in copper ingot sales (ingots have higher margins than rebars) and increase in international scrap-rebar spread.

With regards to the company’s major expense heads, the sales and marketing expense witnessed a meager increase of 5% YoY while administration expenses jumped by 23% YoY in line with inflation.

The major divergence was noticed in other charges head at Rs 121 million, up by 4.3x YoY. The other income showed an improvement, having risen to Rs 67.9 million, up by 170% YoY.

 Furthermore, on the back of easing cash flow and lower interest rates, the finance cost of the company went down by 18% YoY.

MUGHAL’s effective tax rate clocked in at 14% compared to 7% in 1HFY20.

Profit and Loss Account for the Half ended December  31, 2020 (Rupees)

 

Dec-20

Dec-19

% Change

Sales

                            19,445,579,378

                            14,078,665,740

38.12%

Cost of sales

                         (16,848,004,438)

                         (12,726,234,695)

32.39%

Gross profit

                              2,597,574,940

                              1,352,431,045

92.07%

Sales and marketing expenses

                                  (67,577,453)

                                  (64,272,206)

5.14%

Administrative expenses

                               (241,745,579)

                               (196,381,023)

23.10%

Other charges

                               (121,180,601)

                                  (27,970,876)

333.24%

impairment loss on trade debts

                                                      –  

                                                      –  

 

Other income

                                    67,901,022

                                    25,083,054

170.70%

Finance cost

                               (608,345,305)

                               (746,618,101)

-18.52%

Profit before taxation

                              1,626,627,024

                                  342,271,893

375.24%

Taxation

                               (228,233,851)

                                    24,214,666

-1042.54%

Profit after taxation

                              1,398,393,173

                                  366,486,559

281.57%

Basic and diluted earnings per share

                                                 5.56

                                                 1.46

280.82%

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Posted on: 2021-02-19T18:51:00+05:00

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