Corporate Briefing Notes
The management of Indus Motor Company Limited (INDU) held its corporate briefing session to discuss the financial results for 1HFY23 and its future outlook.
● Management informed that the automobile sector is currently facing unforeseen external challenges due to the significant PKR devaluation and import restrictions imposed by SBP. Moreover, the demand has declined due to the prevailing economic downturn, which includes higher interest rates, elevated production costs and increased taxes & duties on the vehicles.
● Net sales in 1HFY23 declined by 36% YoY to PKR86.83bn compared to PKR135bn in SPLY. Similarly, profitability of the company also down by 74.3% YoY to PKR2.6bn in 1HFY23 against PKR10.18bn in SPLY.
● Management reported that the company had to observe frequent shutdowns during the period due to imports restrictions by SBP, resulting in lower production. It is noteworthy that the sales volume of CKD units went down by 52% YoY.
● The Company has declared an interim cash dividend of PKR 10.2 per share for 2QFY23.
● Gross margins of the company dropped to -3.3% in 1HFY23 from 9.1% during the SPLY, mainly due to higher input costs amid PKR depreciation and skyrocketed commodity prices. The company has been unable to pass on the full impact to consumers due to low purchasing power.
● During the period, the company’s short-term investments decreased due to reduction in advances from customers.
● Regarding investment plan of US$100mn for local production of HEV vehicles, the management informed that it is on track and is expected to launch its variant by end of the next year.
● Going forward, restrictions on CKD imports by State Bank of Pakistan, volatility of PKR against US Dollar, high inflation, tight fiscal and monetary measures by government will continue to impact the industry volumes and the future earnings of the Company.
● Moreover, the company has recommended the government to suspend the payments to customers due to delayed delivery, which is set at KIBOR+3%.
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