Karachi, October 26, 2022 (PPI-OT): LUCK, PSMC and INDU: Result Previews

LUCK – unconsolidated earnings to clock in at PkR12.2/sh in 1QFY23F: LUCK is scheduled to hold its board meeting for the 1QFY23 result today, where we expect the company to record an unconsolidated nominal profit of PkR3.94bn (EPS: PkR12.2) vs NPAT of PkR4.0bn (EPS: PkR12.3) in 4QFY22. For 1QFY23F, the topline is expected to increase by 29%YoY and remain flat QoQ due to higher retail prices which more than offset the impact of decline in sales volume by 21.4%QoQ, higher fuel and power costs, and PkR depreciation. Likewise, gross margins are likely to clock in at 28% vs 38.6% in 4QFY22 (efficient inventory management using different variants of coal at lower cost helped LUCK achieve such high GMs in 4QFY22). Furthermore, finance cost (+207%QoQ) is likely to remain at elevated levels in the upcoming quarter. Finally, on a consolidated basis, we expect profitability to stand at PkR11.1bn (EPS: PkR34.4) for 1QFY23F. The company currently trades at FY23 P/E of 8.9x with our TP of PkR827/sh providing an upside of 62% from the last close.

PSMC – 3QCY22 earnings to clock in at PkR0.4/sh: We expect Pak Suzuki Motor Company Limited (PSMC) to post a NPAT of PkR33mn (EPS: PkR0.8) in 3QCY22, decreasing by 97%YoY and 93%QoQ. This will take cumulative 9MCY22 earnings to PkR16mn (EPS: PkR0.2), dropping drastically by compared to earnings of PkR2.2bn (EPS: PkR26.6) in SPLY. The company has witnessed a substantial 59% decrease in volume offtakes, with 16,639 CKD units sold vs. 40,860 units in 2QCY22. Hence, revenue is expected to decline by 58%QoQ/46%YoY to clock in at PkR27.0bn, as although effective prices have increased for the quarter, the revenue proportions of the higher priced Swift and Cultus have decreased, with Alto covering the distance and more. Furthermore, margins are expected to decline to 2.9% owing to the local currency’s hefty depreciation along with high inflation. Financial charges will likely remain concerning for the company, denting profitability, clocking in at PkR1.4bn as bumper compensation on late deliveries are a natural consequence of lower offtakes along with the company’s policy to take 100% advances at time of booking. Other Income is expected to clock in at PkR1.7bn, up 59%QoQ owing to higher interest rates along with strong cash reserves of PkR37.9bn at the end of 2QCY22.

INDU – 1QFY23 earnings to clock in at PkR26.1/sh: Indus Motor Company Limited (INDU) is scheduled to hold its board meeting for the 1QFY23 result today, where we expect the company to post NPAT of PkR2.1bn (EPS: PkR26.1), down by 62%YoY compared to PkR5.4bn (EPS: PkR69.0) in SPLY and 4x the earnings of 4QFY22. The quarter will see INDU post dismal revenues, down by 47%QoQ/42%YoY with a revenue of PkR38.2bn amid volume offtakes of 8,848 CKD units sold, slashing down to half compared to last quarter as SBP’s restrictions regarding the import of CKD kits has had a considerable impact on the company. Moreover, gross margins should see a slight improvement from the poor performance of last quarter, where we expect 1QFY23 margins of 1.5% despite high compensation for late deliveries of PkR1.7bn, which the company parks into its net sales. Other income is expected to provide respite to earnings, clocking in at PkR4.1bn (PkR52.6/sh) for the quarter, down by 21%QoQ owing to refunds provided to customers putting a dent to ST Investments. Lastly, we expect a dividend payout of PkR9.0/sh, with a dampened payout ratio of 35% as the company may likely choose to hold onto cash.