Karachi, November 19, 2021 (PPI-OT): GTYR: Analyst briefing takeaways

The General Tyre and Rubber company (GTYR) held its analyst briefing session yesterday to discuss its 1QFY22 results. To recall, the company posted NPAT of PkR131mn (EPS: PkR1.07) as compared to PkR126mn (PkR1.03) in same period last year, up 4%YoY and loss of PkR64mn (LPS: PkR0.52) in previous quarter.

The gross margin of GTYR has significantly improved in 1QFY22 (GMs: 13% in 1QFY22 vs 7% in 4QFY21) due to the laggard impact of cost pass-on to the OEMs.

With global commodities well into the bull cycle, we expect the cost side pressures to remain intact at least in the upcoming quarter. The weighted average index, constructed by JP Morgan to track the cost of tires, has swelled ~11%QoQ. With majority of the raw material imported, the local manufacturing costs have followed the suit.

After incorporating the price hikes, we can expect the topline to swell by 45-50%YoY in FY22 and earnings to increase 18%YoY to ~PkR670mn (EPS: PkR5.55). Even after declining 35%FYTD, we believe that the stock is fairly valued as it is currently trading at a P/E of 9.7x.