The management of Indus Motor Company Limited (INDU) held a corporate briefing session on 27th Sep’22 to discuss FY22’s financial results and future outlook.

Brief Takeaways

· Indus Motor Company Limited posted an earning of PKR 15,802mn (EPS: PKR 201.04) during FY22, up by 23% YoY from PKR 12,829mn (EPS: PKR 163.21) in FY21. However, the earnings during the last quarter had a massive blow, depicting a decline of 88% YoY and 90% QoQ.

· The massive fall in the profit was a result of lower gross margins and higher taxation due to the imposition of super tax.

· While discussing the financial performance of the company, the management stated that it has recorded all time high volumes of auto sales in FY22, clocking-in at 75,611 units compared to 57,731 units same period last year. Whereas, in 4QFY22 company documented sales of 17,966 units compared to 14,566 units in 4QFY21.

· Despite higher volumetric sales, INDU recorded a massive drop in its gross margins which were recorded at 1.16% in 4QFY22 vis-à-vis 12.28% in 4QFY21. This was majorly due to higher international commodity prices and depreciation of PKR against the green back.

· Albeit, company recorded a jump in its other income, which rose by 209% YoY during 4QFY22 due to high interest rates on a significantly higher quantum of advances from customers.

· The management stated that work on the Hybrid facility is in progress and they plan on launching the same in the current fiscal year.

· Currently the plant is being operated at 40-45% capacity, due to the limitation on raw material imports. However, the management is of the view that if restrictions are completely removed then the company will be able to fulfill the purchase orders within 2-3 months.

· The management also foresees the auto industry sales to come down by 40%, to around 200K units in FY23.

· In 1QFY23, the company is finding it difficult to breakeven due to: i) demand being curbed on the back of higher auto financing rate in the rising interest rate scenario, ii) higher cost of production due to PKR depreciation, and ii) restriction on import of raw material by the SBP.

· The management does not foresee any relaxation from the government in the near future for the auto sector.

Courtesy- AHL Research