PACRA maintains entity ratings of Mughal Iron & Steel Industries

October 17, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings Mughal Iron & Steel Industries Limited (PSX: MUGHAL) at "A+" for the long term and "Al" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

Mughal is a known name in the steel industry. The company’s business profile has sustained and improved, over the last few years.

The governance framework is strengthened by the presence of independent oversight on the board.

The company has a diversified product slate as it operates both in ferrous & non-ferrous segments.

The ferrous segment comprises Billets, Rebars, and girders while the non-ferrous segment comprises Copper ingots.

Furthermore, the establishment of a strong inbound logistics and supply chain network and investment in alternate sources of energy gives a competitive edge to the company.

The ratings incorporate the essence of material advancement that Mughal has achieved in terms of further diversity in revenue streams.

The highlighted achievement through geographical diversification in the revenue stream led to a significant contribution from exports of Copper Ingots & granules to China (i.e.; 24% of revenue contribution) which not only contributed to the top line but also brought sustained profit stream, going forward.

Mughal has attained a formidable market share by establishing the brand and earning trust with regard to quality as well as continuously expanding and upgrading its ferrous and non-ferrous plants, the most recent being the non-ferrous automation plant which came online in June 23.

The company’s top line recorded at Rs67.39 billion in FY23 reported growth of 2% YoY despite the significant decrease in volumes as well as slight erosion in gross margins as the impact of an increase in raw material prices and other input costs was not completely transferred to sale prices.

Net margins also exhibited a downward trend due to high finance costs. The company’s leveraging ratio was reported at 51% in June 23.

Apart from banking facilities, the company has also issued a few privately placed instruments to fuel the increase in its WC requirements.

The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition and exposure to an overall economic slowdown and inflation, herein, effective and prudent management of financial risk indicators remains important.

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