Karachi, July 28, 2022 (PPI-OT): INDU and PSMC: Result Previews

INDU – FY22 earnings to clock in at PkR236.7/sh: We expect Indus Motor Company Limited (INDU) to post NPAT of PkR3.3bn (EPS: PkR42.1) in the closing quarter of FY22, down 25%YoY/35%QoQ compared to PkR4.4bn (EPS: PkR56.2) in SPLY and PkR5.1bn (EPS: PkR65.1) in 3QFY22. This will take cumulative FY22 earnings to PkR236.7/sh (+45%YoY), capping off a great year. FY22 will see INDU post record revenues, with all-time high net sales of PkR276.7bn and volume offtakes of 74,536 CKD units sold, although volumes are down 3%QoQ in 4QFY22 owing to supply-side issues prevalent in the industry. Moreover, gross margins should see an improvement due to the company revising prices twice during the quarter, hence margins are likely to remain flat at 8% compared to 7.7% in the last quarter. Other income is expected to come at PkR4.5bn (PkR58.3/sh) for the quarter, up 44% QoQ, owing to rising interest rates along with strong ST investments held by the company. We expect an adjustment of the 10% Supertax applicable for FY22 to be accounted for in this quarter, bringing ETR for 4QFY22 to 63%, hence reducing earnings for the quarter. Lastly, we expect a dividend payout of PkR28.0/sh, taking cumulative dividends for FY22 to PkR118/sh, with a payout ratio of 50%.

PSMC – 2QCY22 earnings to clock in at PkR2.3/sh: We expect Pak Suzuki Motor Company Limited (PSMC) to post NPAT of PkR189mn (EPS: PkR2.2) in 2QCY22, decreasing by 55%YoY but in contrast to the LPS of PkR5.6 in 1QCY22. This will take 1HCY22 loss to PkR271mn (LPS: PkR3.3), dropping drastically compared to earnings of PkR1.2bn (EPS: PkR14.5) in 1HFY21. We expect this quarter to turn profitable for the company due to a 43% surge in revenue, due to two price hikes along with the company closing the quarter with 40,860 units sold (+11%QoQ). Moreover, the price hikes aforementioned along with outstanding sales for high margin offerings (Swift, Alto) are likely to bring gross margins to 4.2% for the quarter. We expect financial charges to remain concerning for the company, denting profitability, albeit lesser than the PkR1.0bn charge recorded in the previous quarter due to higher volume offtakes which are likely to alleviate the pressure. Further impact on the earnings for this quarter are due to the adjustment of the 10% supertax applicable on CY21, which along with a 4% increase in tax for 2QCY22 takes ETR for the quarter to 73%. A factor to cushion the impact on earnings is the 33%QoQ increase in other income to reach PkR700mn due to rising interest rates. We do not expect the company to announce dividends as it still has some way to go in making up for the loss recorded in 1HCY22.