Al-Ghazi Tractors releases result for the 2QCY20

Al-Ghazi Tractors (AGTL) reported 2QCY20 NPAT PKR270mn (EPS: PKR4.65), compared to a profit of PKR396mn (EPS: PKR6.84) in the same period last year and a profit of PKR166mn (EPS: PKR2.86) last quarter. The result is broadly in-line with our expected EPS of PKR4.44. This takes 1HCY20 NPAT to PKR436mn (EPS: PKR7.51). AGTL, however, did not announce any dividends for the quarter against our estimate of PKR5.0/sh.

2QCY20 Review highlights include:

Net revenues of PK3.0bn, down 19%yoy (up 13% qoq) due to a 25% yoy decline in volumes to 3,092 units from 4,122 units last year (volumes however rose by a modest 8% qoq). This may be due to the government announcing the removal of GST on tractors in the Covid-19 related Relief Package (which has recently been formally approved).

Gross margins of 20.5% came in higher than our expectation of 18.7%, potentially due to (i) upward revision of prices of tractors to pass on cost increases amid stable PKR/US$ for the quarter (ii) lower per-unit overhead costs due to increase in unit sales during the quarter, in our view.

Distribution expenses decreased by 23% yoy (lower sales) but were up 8% qoq, while admin expenses increased by a sharp 67% yoy and 58% qoq. Other expenses declined 8%yoy, while other income declined by 74% yoy (lower cash balance).

Finance costs declined by 70% yoy and 66% qoq. This is potentially due to a decrease in borrowings amid rise in sales, declining interest rates (400bps for the quarter, total decline of 625bps since March) and potential increase in liquidity due to refunds from the government. (Intermarket Securities Limited.)

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