Hifsa Raja

The gross sales of Amreli Steels Limited (ASTL) decreased 26% to Rs11.6 billion in the third quarter of the last fiscal year 2022-23 from Rs15.9 billion over the corresponding period of fiscal 2021-22. However, the steelmaker’s gross profit increased 23% to Rs2.1 billion in 3QFY23 from Rs1.7 billion over the corresponding period of FY22. But the profit-before-tax decreased by 3.46% to Rs546 million in 3QFY23 from Rs566 million in 3QFY22. Similarly, the profit-after-tax decreased by 10.34% to Rs475 million in 3QFY23 from Rs530 million in 3QFY22.

Annual comparison

In 2019, ASTL reported sales of Rs28.6 billion, indicating a healthy revenue stream. However, its net profit of Rs32.8 million was relatively modest in comparison to the substantial sales figure. This pattern suggests that while the company managed to generate significant revenue, there were also considerable costs associated with its operations. The subsequent year, 2020, marked a contrasting scenario for ASTL. Despite a relatively stable sales figure of Rs26.5 billion, the company faced a substantial net loss of Rs1.1 billion.

This downturn could be attributed to a variety of factors, including economic challenges or internal operational hurdles that impacted the company's bottom line. The year 2021 showcased a remarkable recovery for ASTL. The company's sales surged to Rs39.2 billion, indicating a substantial increase in revenue. More significantly, ASTL managed to reverse the previous year's loss, posting a net profit of Rs1.3 billion. This turnaround could potentially signify strategic shifts or operational improvements that positively impacted the company's financial performance

In 2022, ASTL continued its positive trajectory, reporting a substantial increase in sales to Rs58.2 billion. The company sustained its profitability trend, posting a net profit of Rs1.3 billion. This consistent performance indicates that ASTL has not only managed to maintain its growth momentum but has also implemented effective measures to sustain profitability.

The fluctuations observed in ASTL's annual performance reflect the complexities inherent in the steel industry and the broader business environment. The company's ability to rebound from a loss in 2020 to significant profits in the following years underscores its resilience and capacity to adapt to changing circumstances.

Earnings per share growth

The EPS growth trends reflect the roller-coaster journey that Amreli Steels has undertaken. From a steep decline in 2020 to a remarkable recovery and growth in 2021, followed by a more moderate decrease in 2022, the company's financial trajectory underscores the complexities inherent in the business landscape. The company's revival illustrates its capacity to take advantage of opportunities and adjust to shifting market conditions. While Amreli Steels has had challenges in the past, recent significant growth indicates a positive future for the company as it continues to operate in a competitive market with tenacity and strategic insight.

Ratio analysis

The company's profitability measures, including gross, net and operating profit margins, demonstrate its ability to generate healthy returns on its operations.

Amreli Steels Limited's gross profit margin has exhibited a fluctuating pattern over the three quarters of 2023. Starting at 16.18% in the first quarter, it dipped to 10.61% in the second quarter, but rebounded to 13.11% in the third quarter. This pattern suggests a potential volatility in the cost structure and the company's ability to maintain consistent profitability from its core operations. The net profit margin for the first quarter stood at 2.08%, indicating a positive profitability ratio. The second quarter experienced a minor setback with a net profit margin of -0.80%.

However, the third quarter witnessed a recovery as the net profit margin improved to 0.84%. This fluctuation highlights the company's vulnerability to various factors that impact its bottom line, including operational efficiency and external economic conditions. ASTL’s operating profit margin displayed a similar trend to the gross profit margin, with fluctuations observed across the three quarters. Starting at 12.27% in the first quarter, it decreased to 6.99% in the second quarter, followed by an improvement to 9.45% in the third quarter. These variations suggest the need for consistent cost management and operational optimisation to ensure sustained profitability.

Incorporating these findings into a holistic understanding of Amreli Steels Limited's financial performance enables stakeholders to gauge the company's profitability dynamics. The fluctuating ratios underscore the importance of adaptability and proactive measures in responding to changing market conditions, internal efficiencies, and economic influences. A comprehensive analysis of these ratios can guide strategic decisions aimed at optimising profitability and ensuring long-term financial sustainability.

Industry comparison

Amreli Steels Limited’s competitors include Agha Steel Industries Limited, Aisha Steel Mills Limited, International Industries Limited, and Mughal Iron & Steel Industries Limited.

Amreli Steels Limited has a market capitalisation of ₨6.7 billion. Mughal Iron & Steel Industries Limited has the highest market value of Rs16.8 billion. Aisha Steel Mills Limited has the lowest market value of ₨5.2 billion.

Company profile

Amreli Steels was incorporated in 1984 as a private limited company. It was converted into a public unquoted company in 2009. The company is mainly engaged in manufacture and sale of steel bars and billets.

Credit: INP-WealthPk