Indus Motors Ltd (INDU) has reported 1QFY24 NPAT of PKR3.2bn (EPS: PKR40.91), down 16% QoQ but up 2.5x YoY. The result was higher than our estimated NPAT of PKR2.2bn (EPS: PKR28.60), with the deviation primarily stemming from higher-than-expected revenue. A DPS of PKR24.50 accompanied the result.
Key result highlights for 1QFY24:
§ INDU posted revenue of PKR32.7bn, reflecting a 23% QoQ and 12% YoY decrease. This is much higher than our estimated revenue of PKR29.4bn with the deviation led by sale of premium variants of Corolla and Yaris, helping deliver strong revenues.
§ Gross margins declined 8ppt QoQ to 10.1% but outperformed over a gross loss SPLY (-6.3% margins in 1QFY23). Sequential decline in margins can be attributed to the company’s increased sales of Corolla and Yaris, which have lower profit margins compared to the higher-margin Hilux and Fortuner. Additionally, the volatility of PKR and the absence of one-time accounting charges that were present in the previous quarter contributed to the decline. We had initially anticipated gross margins of 9.0%
§ Other income in 1QFY24 totaled PKR2.8bn, showing a YoY decrease of 45% but a QoQ increase of 12%, we had projected other income of PKR2.6bn. The QoQ boost in other income is likely attributed to the higher interest rates observed during the quarter.
§ Among other line items: (i) Distribution expenses decreased by 26% QoQ, likely due to reduced sales during the quarter. (ii) The company reported an effective tax rate of 35%, compared to 29% in the same period last year
Despite challenges stemming from PKR volatility and slowing sales, INDU has posted a commendable result this quarter and remains consistent in delivering good performance. Looking ahead, the next quarter presents significant challenges for the company. INDU has announced a one-month plant shutdown due to inventory shortages, and it has also introduced a price reduction of approximately 4% across its entire product range, impacting gross margins. Nevertheless, the company’s robust cash position continues to provide a shield against macroeconomic instability, and the upcoming launch of the Corolla Cross in 2HFY24 is expected to boost the company’s sales. Consequently, we maintain our Buy recommendation on INDU with a Target Price of PKR1,270/sh.
Courtesy- Intermarket Securities Limited.