Indus Motor Company Limited (INDU) - May 2023

Indus Motor Company Limited (INDU) – May 2023

Research Team

Table of Contents

Corporate Briefing Notes

Indus Motor Company Limited (INDU) held its corporate briefing session today to discuss its financial results for 9MFY23 and it future outlook.

Key Highlights

● To recall, net sales of the company declined by ~34% YoY to PKR135bn in 9MFY23 compared to PKR203bn in SPLY. Similarly, profitability of the company also plunged by 62% YoY to PKR5.84bn (EPS: PKR74.35/sh) in 9MFY23 against PKR15.29bn (EPS: PKR194.56/sh) in SPLY.
● The downtrend in earnings is attributed to 55% decline in CKD and CBU sales volumes at 25K units during the said period, compared to 56K units in SPLY. However, the decline in profitability was offset by higher other income on the back of higher interest rates.
● Besides earnings, INDU also announced an interim cash dividend of PKR24.4/sh, that took 9MFY23 dividend to PKR42.8/sh.
● Gross margins of the company squeezed to 0.15% in 9MFY23 from 8.6% during the SPLY, mainly due to higher input costs followed by PKR depreciation and skyrocketed commodity prices.
● As per management the automobile sector is continuous facing unforeseen external challenges amid significant PKR devaluation and import restrictions imposed by SBP. Moreover, the demand has also declined due to economic downturn coupled with higher interest rates, elevated production costs and increased taxes & duties on the vehicles.
● Moreover, the company had to observe frequent shutdowns during the period due to non availability of input material followed by imports restrictions by SBP.
● 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.
● Moreover, the company has recommended the government to suspend the payments to customers due to delayed delivery, which is set at KIBOR+3%.

Future Outlook

● Going forward, the management foresees that the continuous restrictions on CKD imports, 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. However, the company urges the Govt. to allow the necessary imports for auto sector to maintain production levels at least 50%.

Important Disclosures


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Analyst certification:

The research analyst for this report certifies that 1.All of the views expressed in this report accurately reflect her personal views about the subject and 2.No part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this report.

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