Indus Motor Company Limited (INDU) held a corporate briefing session on 05th Sep’23 to discuss FY23’s financial result and future outlook.

Brief Takeaways

· Indus Motors Company Limited (INDU) announced its financial result for FY23 on 28th Aug’23 whereby the company posted a Profit After Tax (PAT) of PKR 9,664mn (EPS: PKR 122.96), down by 39% YoY. Whereas, during 4QFY23, the earnings swelled up by 7.5x YoY to PKR 3,820mn (EPS: PKR 48.61). The company’s profitability in the last quarter grew due to several factors, including a more favourable sales mix, higher prices, lower input costs, and increased investment income.

· The volumetric sales of Indus motors went down by 58% YoY due to lower production and unavailability of parts amid import restrictions.

· The gross margin for FY23 was recorded at 4.5%, down by 220 bps YoY (FY22: 6.7%). This decline in gross margins came on the back of PKR depreciation. Nevertheless, on a sequential basis, INDU recovered its gross margins, recording 18.1% during 4QFY23, compared to 1.2% in 3QFY23. Higher margins in 4Q were recorded on the back of one-time inventory gains and are expected to normalize going forward.

· During FY23, the company’s decline in profitability was overcome by higher other income, which was recorded at PKR 14.2bn (+51% YoY). The upsurge in other income was due to higher returns on short-term investments as interest rates remained elevated.

· The SBP import restrictions and the volatile exchange rate will remain challenging for the auto sector.

· During FY23, the company had to observe frequent plant shutdowns i.e. ~45 days.

· Total Assets of the company were recorded at PKR 122bn (down by 43% YoY) during FY23, mainly led by reduction in consumer advances which were recorded at PKR 9.7 bn, down by 91.3% YoY.

· The proportion of locally-sourced parts in Corolla and Yaris is 60%, while the proportion of locally-sourced parts in IMVs is 42%.

· The management stated that work on the Hybrid facility is in progress and is expected to launch the HEV vehicle in next 4-6 months.

· The management stated that the company will be planning for electric vehicles after introducing locally assembled hybrid vehicles. Electric vehicles aren’t prioritized at this point in time amid lack of charging infrastructure in Pakistan and the high reliance on non-renewable energy.

Courtesy- AHL Research