Pak Suzuki Motor Company (PSMC) announced its 2Q2022 financial results, where the company has posted profit of Rs443mn (EPS: Rs5.4) against profit of Rs419mn (EPS: Rs5.2) in same period last year. The result came higher than our expectation where the major deviation came from higher than expected gross margins and lower taxation expense.

This takes 2H2022 loss to just Rs17mn (LPS: Rs0.2) against profit of Rs1,197mn (EPS: Rs14.5) in SPLY. To highlight, company incurred loss of Rs460mn in 1Q2022 which has been largely covered in 2Q2022 due to 1) Increased car prices to support margins, 2) Higher Other income and 3) Increase in unit sales by 11% YoY due to higher demand of economic segment cars.

Gross Margins of the company clocked in at 4.4% down by 141bps YoY in 2Q2022 whereas, sequentially, margins have improved by 74bps due to increase in car prices and launch of Swift.

Other Income rose up by 3x YoY to Rs1,037mn in 2Q2022 due to stronger order book and higher interest rates.

Finance cost increased by 18x YoY to clocked in at Rs811mn due to increase in mark-up cost on late deliveries and exchange loss.

Effective tax rate has clocked in at 68% in 2Q2022 as compared to 29% in 2Q2021 due to implication of super tax.