Hinopak Motors Limited (HINO), a key player in Pakistan’s truck and bus assembly market, is positioned to benefit from the ongoing recovery in economic activities and improving financial conditions. Despite challenges in recent quarters, including rising finance costs, the company has demonstrated operational resilience.

Key factors such as declining debt, falling interest rates, and increasing customer advances indicate a promising turnaround. Additionally, with GDP growth projected at 3.2% in FY25, HINO is expected to experience significant sales volume growth, reinforcing its long-term value proposition.

Key Observations

Declining Debt and Lower Interest Rates: HINO’s short-term debt has declined from PKR2.3bn in March 2024 to PKR800mn in September 2024. Falling interest rates have reduced the 3-month KIBOR to 12.81% in November 2024, down from 20.24% in June 2024. This decline will reduce financial charges in the coming quarters, improving profitability and strengthening the company’s interest coverage ratio.

Increasing Customer Advances: Advances and deposits from customers rebounded from PKR221mn in March 2024 to over PKR1bn by September 2024.This surge in advances reflects a rise in customer orders, particularly in the truck segment. The uptick in orders signals future growth in sales volumes.

Economic Recovery and GDP Growth: Pakistan’s economic recovery is expected to drive higher demand for commercial vehicles. With GDP growth projected at 3.2% for FY25, logistics and infrastructure development sectors are anticipated to accelerate, benefiting HINO’s sales performance.

Financial Highlights

In Sep’24, HINO significantly improved its financial and operational performance. On a yearly basis, net sales surged by 41.2% to PKR2.7bn, driven by a 32.9% increase in sales volume to 113 units, with truck sales rising by 87%; however, bus sales declining by 30.8%. Gross profit rose by 74.9% YoY to PKR390mn, improving the gross margin to 14.43% from 11.65%. Operating profit showed a remarkable turnaround, climbing to PKR179mn from PKR4mn, while PAT jumped to PKR72mn, compared to PKR2mn in Sep’23.

On a Quarterly basis, net sales increased by 40.9%, gross profit grew by 73.3%, and net profit reversed from a loss of PKR120mn in June 2024. Financial charges declined by 30.8% to PKR99mn, benefiting from lower short-term debt and reduced KIBOR rates.

Courtesy – AHCML Research