VIS reaffirms entity ratings of MUGHAL

November 19, 2024 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Mughal Iron & Steel Industries Limited (MUGHAL) at ‘A+/A1’, according to the press release issued.

The A medium to long-term rating of 'A+' indicates good credit quality and adequate protection factors.

Risk factors may vary with possible changes in the economy. A short-term rating of 'A1' indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

The previous rating action was announced on December 08, 2023.

The assigned ratings reflect the steel bar industry's high cyclicality, reliance on imported raw materials, and significant energy consumption in Pakistan.

“The industry faces challenges from demand fluctuations driven by construction sector performance, exposure to currency depreciation, and competitive market dynamics”, the statement said.

Although government spending on infrastructure provides support, demand volatility persists due to economic cycles, inflationary pressures, and financing constraints, which impact private construction activities.

Assigned ratings also consider MUGHAL’s financial performance marked by revenue growth in both ferrous and non-ferrous segments, attributed to increased pricing and quantum.

The statement added that input-cost inflation, currency depreciation, and energy expenses constrained gross margins. Liquidity remains adequate, though there was a slight contraction in key metrics.

Capitalization levels increased with additional debt utilization, while coverage metrics reflect pressure from reduced operational income amid higher interest expenses.

Despite lower operational funds, management plans to meet short-term obligations with current funds and expects exports and cost savings to aid long-term needs.

Going forward, ratings remain sensitive to the company’s ability to improve profitability margins, manage debt service coverage effectively, and maintain adequate liquidity ratios considering the high-interest cost burden.

MUGHAL, established on February 16, 2010, is a public limited company listed on the Pakistan Stock Exchange Limited.

Headquartered in Lahore, MUGHAL operates in ferrous and non-ferrous segments, primarily focusing on manufacturing and selling mild steel products.

The company's manufacturing and warehousing facilities are located on Sheikhupura Road, Lahore, and the sales centres are at Badami Bagh, Lahore.

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