MUGHAL Steels: Riding on Lower Costs and Construction Revival

Lower raw material costs, a big win

Good news for Mughal Iron & Steel (MUGHAL) Steels! The company is set to benefit from falling raw material costs. This is mainly because of:

• Lower duties on imported steel scrap
• Stable international scrap prices

Steel scrap is the main ingredient for making steel. With duties reduced and prices ~28% below their FY22 peak, MUGHAL’s costs are falling fast.

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What does this mean for margins?
A 3-4% boost in primary margins, rising from 27% to about 31%.
Simply put, the company will keep more profit from every ton of steel it sells.

The construction sector is coming back

The timing couldn’t be better. Pakistan’s construction sector, which is the biggest buyer of long steel, is showing signs of revival:

• Interest rates have dropped from 22% to 11%
• Currency (USD/PKR) has stabilized
• Energy costs are lower
• The government is backing housing and infrastructure through financing schemes and loan guarantees

All of this means more demand for houses, buildings, and infrastructure. And when construction picks up, demand for steel goes up, too.

Why does this matter for investors?

MUGHAL sits at the sweet spot: lower costs + higher demand. With cheaper raw materials and construction activity improving, the company is set to enjoy stronger margins and higher sales volumes.

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For long-term investors, this combination could drive steady growth in both earnings and market share.

Source: Arif Habib Limited

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →