Mughal Iron and Steel Industries Maintains Stability Amid Sector Challenges

LAHORE: Mughal Iron and Steel Industries Limited has successfully maintained its entity ratings, demonstrating resilience amidst challenges in the steel sector and benefiting from macroeconomic improvements. Despite the pressures of high operational costs and regulatory changes, the company has managed to sustain its market position while seeing a decline in overall revenue and margins due to strategic shifts in sales focus.

The fiscal year 2025 showed signs of economic recovery, with easing inflation and declining policy rates contributing to a modest upturn in the construction sector. However, the steel industry is recovering more slowly compared to other construction-related industries, facing significant challenges such as high dependence on imported raw materials and elevated power tariffs. These factors, alongside regulatory changes, present ongoing difficulties for the sector.

Mughal Iron and Steel Industries has managed to maintain its market share due to capacity availability as other players operate at limited levels. The company’s extensive distribution network across the country ensures broad market access. Despite high operational costs, the company’s leverage ratio improved to approximately 48% in FY25 from 57.6% in the previous fiscal year.

The company experienced a reduction in export volumes from its non-ferrous segment, historically contributing over 20% of revenues, which led to a decline in overall revenue from PKR 92.383 billion in FY24 to PKR 89.479 billion in FY25. The company’s net margins faced pressure due to finance costs and taxation.

Looking ahead, profitability is projected to improve with the commissioning of Mughal Energy, an alternative energy channel, expected to operationalize soon. This initiative is anticipated to reduce operational costs structurally. Additionally, the continuous decline in policy rates is expected to lower finance costs further.

The company’s ability to maintain its sound business profile remains crucial, with the successful commissioning of ongoing projects expected to enhance production performance and operational efficiency. Improvement in the company’s financial metrics and timely debt repayment continue to be key factors for sustained ratings.