PACRA upgrades entity ratings of MUGHAL

October 26, 2021 (MLN): Mughal Iron & Steel Industries Limited (MUGHAL) has informed through a notice to Exchange that Pakistan Credit Rating Agency (PACRA) has upgraded its entity ratings from A to A+ for the long-term while it improved ratings to A1 from A2 for short-term.

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, as per PACRA’s press statement.

The Company's business profile has sustained and improving, over the last few years.  Governance framework strengthened by induction of independent oversight on board. The Company has diversity in its product slate as its operating segments comprise of ferrous & non-ferrous segments. The ferrous segment comprises Billets, Rebars & Girders while the non-ferrous segment comprises Copper ingots mainly, it said.

Furthermore, the establishment of strong brands like `Mughal Supreme' 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 to China (i-e; —15% 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.

The Company's focus is penetrating the retail segment while considering the inclining trend in demand growth coming from that segment. This strategic realignment contributes 71% volumes (FY20: 60% of sales mix). The capacity expansion project came online in Jun-21 which enhanced the rebar capacity by 430,000/MT, it added.

Furthermore, the Company is in the process to procure three furnaces which will enhance re-rolling capacity by 90,000 MT/furnace. Enhanced capacities are going to enable Mughal, to explore untapped markets while taking its business insight into account. The reported profitability for Jun-21 showed significant growth from previous years wherein, FY20 results depicted that Mughal held its position during the challenging environment posed by Covid-19. Margins witnessed growth, primarily attributable to a global increase in local demand and curtailed key policy rates, the press release said.

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