Shams ul Nisa

Mughal Iron and Steel Industries net sales leapt to Rs46.04 billion in the first half of the ongoing fiscal year (1HFY24), posting a 47.4% growth over the corresponding period of FY23. The major contributing factors for this spike included high selling prices and volume of ferrous and non-ferrous segments, reports WealthPK. Gross profit grew by 49.45% to Rs5.02 billion in 1HFY24 from Rs3.36 billion in 1HFY23. The company's gross margin slightly grew to 10.91% from 10.76% in 1HFY23. 

Administrative expenses stood at Rs405.4 million in 1HFY24, 29.89% higher than Rs312.13 million in 1HFY23, mainly due to an increase in the salary of employees. Other income posted an increase of 32.32% in 1HFY24 because of profit in saving accounts, totalling Rs106.7 million as opposed to Rs80.6 million in 1HFY23.

The profit-before-tax grew significantly by 44.81% to Rs1.55 billion in 1HFY24 from Rs1.07 billion in the same period last year. However, the company suffered a 4.0% decline in net profit, which went down to Rs1.28 billion in 1HFY24 from Rs1.34 billion in 1HFY23. The net profit margin stood at 2.80% against 4.30% in 1HFY23. In 1HFY24, the company reported earnings per share of Rs3.84 compared to Rs4.00 in 1HFY23.

Quarterly analysis

The company posted a substantial surge in net sales and gross profit at 45.7% and 96.24%, respectively, in 2QFY24. It registered net sales of Rs25.01 billion and a gross profit of Rs2.5 billion this quarter, reports WealthPK.

The company's other income shot up by a massive 334.94% to Rs54.8 million compared to a negative income of Rs23.3 million in 2QFY23. Net profit in 2QFY24 stood at Rs773.48 million, up 64.2% from Rs471.05 million in the same period last year. Earnings per share climbed to Rs2.30 in 2QFY24 from Rs1.40 in 2QFY23.

Historical trend analysis

The firm's net turnover of Rs30.8 billion in 2019 dipped to Rs27.3 billion in 2020. However, it steadily rose afterwards, peaking at Rs67.39 billion in 2023. The net profit peaked at Rs5.4 billion in 2022 before falling to Rs3.48 billion in 2023. The company also sustained a significant dip of Rs592.8 million in 2020 compared to the previous year.

The gross profit margin peaked in 2022 at 15.31%, slightly dropping to 14.35% in 2023. The company's net margin and earnings per share followed a similar pattern, with the highest value of 8.18% and Rs16.12 in 2023. In 2023, the company registered a net margin of 5.16% and an earnings per share of Rs10.39.

Liquidity ratio analysis

The current ratio of a company measures its ability to cover short-term liabilities with current assets.

A current ratio lower than 1.2 indicates increased risk for the firm to meet its short-term obligations, whereas a ratio between 1.2 and 2 and above is considered safe.

The company's current ratio remained above 1.2, barring 1.12 in 2020.

The company witnessed improvement in this ratio from 2020 onwards.

Similarly, the quick ratio measures a company's ability to finance its short-term obligations using its most liquid assets. The quick ratio remained below 1 from 2019 to 2023, indicating a higher risk for the firm as it didn't have enough quick assets to meet all its short-term obligations. The company had sufficient cash to cover its current liabilities as the cash-to-current liability ratio remained below 1 over the period under review. The company registered the highest value of 0.28 cash to current liability in 2019.

Future outlook

Despite rather depressed economic conditions and a high discount rate, the company aims to operate its top and bottom lines smoothly.

Company profile

Mughal Iron & Steel Industries was established in Pakistan as a public limited company on February 16, 2010. The company's operations comprise ferrous and nonferrous business segments. However, the principal activity of the company is the manufacturing and sale of mild steel products relating to the ferrous segment.

Credit: INP-WealthPk