Pak Suzuki Motor Company Limited (PSMC) announced its 2QCY20 result earlier today where the company recorded a loss of PKR 1.52bn (PKR 18.49/sh) compared to loss of PKR 545mn in the same period previous year. Cumulatively, this takes loss during 1HCY20 to PKR 2.46bn compared to a loss of PKR 1.53bn during SPLY. Results outperformed our expectations due to a tax reversal of PKR 551mn.

The automaker posted a gross loss of PKR 612mn in 2QCY20 vs. a gross profit of PKR 573mn in the previous quarter. Lower volumetric sales (down 45%/75% on QoQ/YoY) due to lackluster demand and the country wide lock-down kept the profitability under pressure. To put things in perspective, it is also important to highlight that there were zero automobile sales in the month of April’20.

Finance cost declined by 16% QoQ to PKR 886mn in 2QCY20 as a result of sharp reduction of 625bps decline in in policy rate since Mar’20. Going forward, we expect finance cost to remain lower on account of lower interest rates and reduced short term borrowings due to improved cash flows.

Distribution and admin costs decreased to PKR 244mn (down 66% YoY) and PKR455mn(down 22% YoY) in 1HCY20, respectively. This can be attributed to depressed sales (down 75% YoY) during the period.

We initially had a Sell stance on the company as the current market price has already exceeded our Dec’20 TP of PKR128. (BMA Capital Management Ltd.)