A review of financial performance of Pak Suzuki Motor Company

Pak Suzuki Motor Company Limited (PSMC) held its analyst briefing session to discuss the key outcomes of 1QCY21 and CY20 results. To recall, the company posted a PAT of PKR 778Mn (EPS: PKR 9.45), compared to PAT of PKR 1,007Mn (EPS: PKR 12.23) and LAT of PKR 941Mn (LPS: PKR 11.44) in 4QCY20/1QCY20, respectively. On an annual basis, PSMC posted LAT of PKR 1.59Bn (LPS: PKR 19.31) in CY20, compared to LAT of PKR 2.92Bn (LPS: PKR 35.49) in CY19. Key highlights of the session are discussed below: –

The total industry sales clocked in at 124,316 units in CY20, down 34% YoY. The auto sales of PSMC declined by 47% to 59,281 units in CY20. While motorcycle sales declined by 24% to 17,111 units.

All PSMC segments also declined across the board in CY20. The 800cc, 1000cc, 1300cc, LCV and CBU segments declined by 46/47/54/50 & 87% YoY to 29,436/21,131/1,690/6,796 & 228 units, respectively. The only vehicle to record an increase in sales was the Suzuki Jimny which sold 90 units in CY20 (↑ 34% YoY), mainly on the back of new shape launch in 2020.

On a market share basis, PSMC’s share declined 11% in CY20 to land at 48%. On the other hand, both INDU and HCAR increased their market share by 8/3% to make up 33/18% of the market.

The total industry sales clocked in at 54,764 units in 1QCY21, up 78% YoY. The auto sales of PSMC doubled YoY to 28,101 units in 1QCY21. Similarly, motorcycle sales also witnessed increase to 6,815 units in 1QCY21, up 71% YoY.

All segments of PSMC showcased YoY increase in 1QCY21 except the CBU segment. The 800cc, 1000cc, 1300cc and LCV segments increased by 163/45/3 & 105% YoY to 15,733/7,980/898 & 3,466 units, respectively. The CBU segment recorded decline of 80% YoY to 24 units in 1QCY21.

On a market share basis, PSMC’s and other players witnessed uptick of 11/3% in 1QCY21 and reached 51/4% market share. On the other hand, both INDU and HCAR were unable to hold their market share from 1QCY20 and decline by 6/4% to settle at 30/15% of the market.

Gross margins remained under pressure in 1QCY21 despite higher sales of 28,077 units (↑106/37% YoY/QoQ) and exchange rate appreciation due to higher freight charges (Air and shipping) and raw material cost.

Auto financing is becoming increasingly more important for the sector (inline with global market), as vehicle prices soar. The management stated that auto financing sales made up 40% of the total sales of PSMC in CY20 compared to 30-35% in CY19.

PSMC has provided its input for the new auto policy, with major focus on reduction/removal of Federal Excises duty (FED) and Additional Custom duty (ACD). This may lead to higher margins and possibly lower prices.

Further, the company has requested for a similar policy to electric vehicles for hybrid vehicles. The electric vehicle adoption phase is still a long term vision for PSMC, as the company feels its too early for the Pakistani market.

Courtesy – BMA Capital Management Ltd.

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