The management of Millat Tractors Limited (MTL) held a corporate briefing session today to discuss the FY22 financial result and future outlook.

Brief Takeaways

· To recall, Millat Tractors Limited (MTL) announced its financial result for FY22 on 23rd Sep’22, whereby the company posted a Profit After Tax (PAT) of PKR 5.4bn (EPS: PKR 56.02), down by 6% YoY.

· Net revenue of the company went up by 21.4% YoY to PKR 53mn, mainly due to increased prices of tractors. However, a volumetric decline in sales of 14% YoY was witnessed to 35,005 units in FY22 (35,515 units in FY21). In addition, gross margins in FY22 declined to 19.1% down by 2bps YoY, mainly due to higher cost of sales amid PKR depreciation and increased commodities prices.

· Delayed refunds of sales tax from the government resulted in augmented financial cost (which settled at PKR 227mn against PKR 9mn last year) to meet working capital requirement. This, also resulted in production activity being shut down twice a year.

· Going forward, tractors have been exempted from sales tax. However, the sales tax amount is integrated with import prices of raw material which resulted in higher cost of production, and was transferred to the end customer in form of higher prices. This will not create any new sales tax refunds from the government.

· Management belies that tractors demand will boost from FY23 3rd quarter onwards, as enhancement in construction activity for rehabilitation of domestic, agricultural and commercial lands will take place. In addition, the government policies and farmer package may help the farmer to invest in farm mechanization and rehabilitation.

· Management of MTL is also eyeing increase in exports and developing the export market, keeping in view the decline in domestic demand of tractors.

Courtesy- AHL Research