Karachi, August 11, 2021 (PPI-OT): ASTL and INDU – 4QFY21 Result Previews

ASTL – Earnings to rebound in FY21 to PkR4.53/sh: ASTL is slated to announce its 4QFY21 result (13th Aug’21), where we expect the company to record a nominal profit of PkR420mn (EPS: PkR1.41) vs net loss of PkR438mn (LPS: PkR1.48) in 4QFY20. This will take FY21 NPAT to PkR1.35bn (EPS: PkR4.53) on the back of sturdy offtakes +32%YoY against a net loss of PkR1.13bn (LPS: PkR3.79) in FY20. The expected earnings for the quarter primarily comes on the back of 22%QoQ growth in the topline largely on account of higher volumes +11%QoQ. Gross margin to clock in at 10.9% compared to 13.9% in 3QFY21 because of soaring scrap prices (+14%QoQ) and failure to pass on cost completely (rebar prices +4.3%QoQ).

For FY21, the swing in profitability comes on the back of robust growth in topline +48%YoY amid massive jump in offtakes +32%YoY with a gross margin of 11.63% in FY21 vs 7.4/8.5% in FY20/19. While a drop of 29%YoY in finance cost will also help in amplifying bottom line. Moreover, we expect ASTL to announce a payout of PKR1.0/sh for the year in the upcoming financial result. The company currently trades at FY22 P/E of 8.16x while 3-yr PEG stands at 0.45x with our TP of PkR64/sh provides a capital upside of 44% from last close – Buy.

INDU to post a whopping 126%YoY higher FY21 NPAT; Dividend to subside at PkR100/sh: We expect Indus Motors Company Limited (INDU) to post 4QFY21 NPAT of PkR3.1bn (EPS: PkR39.3), down 15%QoQ, taking the collective FY21 earnings to PkR11.5bn, translating into PkR146/sh (+126%YoY). We expect the sales in 4QFY21 to deteriorate by 16%QoQ on account of 12%QoQ lower volume offtake (14.6k units in 4QFY21 vs 16.5k units in 3QFY21) while the gross margins are expected to clock in at 8.3% compared to 9.2% in 3QFY21 due to an upsurge of 13/22%QoQ in CRC/HRC prices. On the other hand, we expect the other income in FY21 to clock in at PkR5.9bn (+86%YoY) on account of cash and ST investments of ~PkR70bn as per the latest financial statements. Hence, we expect INDU to post NPAT of PkR11.5bn, translating into PkR146/sh (+126%YoY, coming from a low base).

In addition to this, we expect a payout of PkR33/sh taking the annual payout to PkR100/sh. Going forward, we expect the volumes to grow further in FY22 on the back of auto policy’21 coupled with new Corolla in pipeline (most likely to be propelled in hybrid variant as well) and other minor facelifts of Fortuner and Revo providing significant pricing power to the company in premium segment. Our target price of PkR1,826/sh implies an upside of 39% from last close in addition to DY of 10%, taking the total return to 49%. The stock is currently trading at FY22 P/E multiple of 7.3x compared to historical average of 9.5x.