The management of Indus Motors Company Limited (INDU) held a corporate briefing session today to discuss the FY21 financial results and future outlook on the company’s strategy going forward.

Highlights:

• Indus Motor Company Limited (INDU) posted earnings of PKR 12,829mn (EPS: PKR 163.21) in FY21, increasing by 152% YoY from PKR 5,082mn (EPS: PKR 64.66). While earnings in the last quarter arrived at PKR 4,413mn (EPS: PKR 56.15), depicting a growth of 44x YoY and 22% QoQ.
• During FY21, topline of the company increased by 108% YoY to PKR 179bn attributable to volumetric growth of 102% YoY to 57,236 units (Yaris 28,295 units, Corolla 18,355 units, Fortuner 3,543 units, Hilux 7,043 units) vs. 28,378 units (Yaris 1,327, Corolla 22,140 units, Fortuner 1,163 units, Hilux 3,748 units) in FY20. Revenue during 4QFY21 increased by 364% YoY to PKR 48bn, primarily owed to surge in sale of cars by 373% YoY (14,566 vs. 3,078 units) given low base effect.
• Gross margins settled at 9.30% in FY21, up by 65bps YoY due to appreciation of PKR and change in sales mix which wiped off the impact of excess freight cost and higher steel prices.
• During FY21, other income increased by 74% YoY to PKR 5,579mn on account of significant jump in short term investment (government securities), and cash and bank balances.
• Overall car sales in the country increased by 75% YoY in FY21 to 250,602 units compared to 143,320 units in same period last year. The growth was mainly contributed by KIA (up by 171% YoY to 21,952 units), Toyota (up by 100% to 57,731 units) and Hyundai (up by 1224% YoY to 5,826 units).
• While used car imports (CBU) increased by 102% YoY to 21,239 units in FY21 compared to 10,537 units in same period last year.
• The management highlights higher delivery time of vehicles is due to shortage of chips and global congestion on ports which is causing supply chain disruptions.
• Company is currently operating at a double shift capacity and will continue doing so due to massive demand of vehicles.
• In order to support auto industry, the Government of Pakistan took some initiatives like reduction in FED, ACD and taxes which is expected augment demand of the automobile sector and also improve capacity utilization of the company.
• Government also announced incentives for environmentally friendly cars in the Finance Act’21. In order to benefit from this, INDU is planning to invest USD 100mn for the production of Hybrid Electric Vehicle Cars in Pakistan. Management believes the government will continue providing incentives on environmental friendly vehicles and this will become part of the Auto policy.
• Moreover, management has also requested the government to reduce FED on double cabin vehicles as this is creating disparity with other motor vehicles.
• With depreciation of PKR, higher commodity prices (steel and aluminum) and higher freight Cost, INDU will have to increase car prices sooner or later because it is not sustainable for automobile companies to bear higher cost burden.

 Courtesy – AHL Research