Millat Tractors exports for the year clocked in at PkR4.0bn compared to PkR2.6bn in FY23

Millat Tractors Ltd. (MTL) held its corporate briefing today to discuss its FY24 financial results and future outlook. The following are the key highlights as reported by AKD Research:

The company posted a topline of PkR91.5bn in FY24 compared to PkR44.2bn in FY23, due to a surge in sales and price hikes.
Exports for the year clocked in at PkR4.0bn compared to PkR2.6bn in FY23, due to a 66% increase in exports volume. Afghanistan and Africa remain the major export destinations.
Industry sales for FY24 increased by 47% year over year, rising from 30,942 units in FY23 to 45,494 units. In comparison, the company’s sales surged by 64% year over year, capturing 66% of the market share.
Moreover, the company’s earnings for the year clocked in at PkR9.9bn (EPS: PkR51.7) in FY24 compared to PkR3.4bn (EPS: 17.61) in FY23 due to the aforementioned increase in sales and other income (up 120% YoY).
The company imports 5% of the raw material for Low-horse tractors compared to 10% for High-horse tractors, bringing the overall localization level to 92%.
As of June 2024, the company had outstanding sales tax refund claims totalling PkR6.28bn. However, management anticipates that the recent increase in the sales tax rate on tractors from 10% to 14%, as per SRO 1643(I)/2024, will remove the company from the refund regime and contribute to improved working capital management.
Sales have slowed due to two main factors: confusion over the sales tax refund mechanism, which led management to seek clarification from the Federal Board of Revenue (FBR), and a delay in farmer purchases caused by the ongoing balloting process for the Punjab Green Tractor Scheme. Many farmers are waiting for the results before deciding to buy.
Under the Punjab Green Tractor Scheme, 9,500 tractors are to be distributed, with 5,800 tractors allocated to the company. Management expects the delivery of these tractors to be completed either by the end of the current quarter or by the next quarter.
Management stated that the threat from imported tractors is not a major concern because their prices are ~150% higher than those of locally produced tractors.
Reports from SECP and CCP are awaiting the court’s final order on the merger of MTL and MEL. Management anticipates the merger will be concluded by Dec’24, subject to regulatory approvals.
The company has an extensive nationwide network of 89 main dealers, 73 parts dealers, and 587 workshops.
The company’s tractor lineup currently spans from 50 horsepower to 85 horsepower.
Management does not plan to expand, as they believe their existing capacity is sufficient to meet demand.
Management expects cash flow positions to improve as deliveries are made under the Punjab Tractor Scheme, following a buildup of inventory caused by the industry slowdown.
The scrip is not in our formal coverage.
Courtesy – AKD Research