Dear Clients,

– Indus Motor Company Limited (INDU) announced a profit after taxation of PKR 3.6bn for 3QFY21 translating to EPS of PKR 45.98 (up by 35% YoY), undershooting our estimates of PKR54.5/sh as a result of lower than anticipated margins.

– Along with the result, INDU announced an interim cash dividend of PKR 30/sh for the quarter taking total dividends to PKR 67/sh in 9MFY21.

– Cumulatively, the company reported profits of PKR 8.4bn for 9MFY21, up by 69% YoY.

– Revenue of the company increased by 56% YoY as the company recorded vehicle sales of 16,531 units in 3QFY21 as compared to 11,125 units in 3QFY20. Volumetric sales were up by 49% YoY because of Toyota Yaris model launch and low-interest rate environment driven demand jump.

– In 3QFY21, the gross profit margin stood at 9.2%, lower by 291bps YoY. These margins were lower than our projections. We attribute hike in fright charges on CKD imports as well as currency volatility as major influencers for the lower than anticipated margins.

– Administrative expenses grew by 23% YoY while distribution costs dropped down by 21% YoY.

– Better profits led to sequential uptick in WPPF and WFF charges. Cumulatively, other expenses stood at PKR 314mn.

– Other income increased by 29% YoY owing to greater short-term investments and cash balances compared to the same period last year. To note, the healthy order book held by the company led to greater customer advances received, increasing the cash balance.

– Effective tax rate for the quarter resided at 28% as compared to 31% in the same period last year.

– For 9MFY21, the bottom-line resided at PKR 107.06/sh compared to PKR 63.41/sh last year. Improved volumes have been the key driver of earnings.

– We like the stock and maintain our Positive stance on INDU and the sector. Going forward, we eye demand to remain healthy buoyed by low-interest rate environment and an overall increase in need for ownership negating concerns.

Regards,
KASB Research