Mughal Iron & Steel Industries Limited IPO: ‘Subscribe’
Mughal Iron & Steel Industries Limited (MISIL), is all set to be listed at the Karachi & Lahore Stock Exchanges, offering 27.35 million shares at a price band of Rs 20/share to Rs 34/share. Company was established in 1950 and one of the leading companies of Pakistan in the iron and steel sector. The Company is involved in multidimensional activities from making billets of Mild Steel, Spring Steel, Deformed bar, Re-bar, Cold Twisted Rebar and a huge range of Sections such as I.Beams, L.Sections, C.Section, H.Beam, T.Bar etc. in the downstream industry.
Over subscription likely in book Building
The Company is issuing 27.35 million ordinary shares (25% of post issue paid-up-capital) in a price band of Rs 20/share to Rs 34/share. The first phase of 75% of the total offering (20.51 million shares) will be offered to Institutional Investors and High Net Worth Individuals through book-building that would be taken place from February 16, 2015. Whereas in second phase, remaining 25% (3.25 million shares) will be offered to the general public at the Strike Price which will be determined through the Book Building Process.
We expect company would generate around Rs 930 million from current offer which would utilize to acquire a new 7.5MW Induction Furnace and to balance modernize & replace its Re-rolling mill. New 7.5MW induction melting furnace likely reduces the overall cost of production. While upgradation of re-rolling mill would hike production by 30%.
Earning grew at CAGR of 91% during FY12-14
Company profitability rises at a 3 year CAGR of 91% (FY12-14) to Rs 391 million (EPS:Rs 3.57) in FY15 against Rs 107 million (EPS: Rs 0.98) in FY12 due to gigantic revenue growth and better margin. We expect this trend would continue and company to post robust growth of 35% in FY15 as profit after taxation to clock at Rs 527 million (EPS: Rs4.81) in FY15 mainly driven by higher demand of steel product. However company has extraordinary inventories in hand which is worrisome as it rises by 641% to Rs 3,504 million against Rs 473 million as on June 30, 2013.