Karachi, November 10, 2021 (PPI-OT): INDU: Lean, mean, vehicle volume machine

Indus Motor Company Limited (INDU) held its analyst briefing session today to discuss its 1QFY22 results. To recall, the company posted NPAT of PkR5.4bn (EPS: PkR69), swelling by 194%%YoY/22%QoQ. In addition to this, the company announced interim cash dividend of PkR34.5/sh.

The growth in topline is attributed to 59%YoY/28%QoQ increase in volumes owing to budgetary measures which resulted in price decreases, hence, putting the industry in a macro sweet spot. In addition to this, the company’s Cash and ST investments increased by 28%QoQ resulting in higher other income (+100%YoY/21%QoQ).

As per the latest updates, the company has increased the prices of its vehicles across the board by ~7%, in line with the depreciation of PkR against the US$ in 1QFY22, thereby nullifying the impact of higher input costs. According to our estimates, 1% increase in price inflates the earnings by ~5%.

Updating our assumptions in light of latest developments, we revise our estimates for INDU where we expect the revenue in FY22 to increase by 52%YoY while the earnings to witness a growth of 36%YoY to stand all time high at ~PkR17.5bn (EPS: PkR223).

After incorporating the major risks, we reiterate our Buy stance on INDU with June’22 target price of PkR1,800/sh, implying an upside of 48% from the last close and DY of ~12%, taking the total return to 60%. The stock is currently trading at a cheap P/E multiple of 5.5x.