Karachi, August 28, 2023 (PPI-OT): INDU 4QFY23 Result Review - Earnings beat market consensus

Indus Motor Company Ltd. (INDU) announced its 4QFY23 results today, where the company posted earnings of PkR3.8bn (PkR48.6/sh), showing a 19%QoQ increase from the preceding quarter's PAT of PkR3.2bn (EPS: PkR40.9). The earnings surpass street consensus, primarily attributed to improved gross margins. The company also declared a cash dividend of PkR29/sh.

Topline clocked in at PkR42.7bn, marking an 11%QoQ decline from the previous quarter's PkR48.2bn, driven by a 25% drop in sales volumes that offset the price increases. For FY23, the topline faced an annual contraction of 35% due to a significant 58% decline in sales volumes, with 31.1k units sold compared to 74.5k units in the corresponding period.

Gross margins notably improved to 18.1% during the quarter, a substantial rise from 6.3% in 3QFY23 and 1.2% in SPLY. This improvement can be attributed to the full impact of increased prices during the quarter, stable PkR/US$ parity, and annual accounting adjustments.

Operating expenses witnessed a 16%QoQ increase, totaling PkR1.2bn, driven by inflationary pressures. However, annual decline 24% in other expenses is due to decreased transportation and advertising costs.

Other income experienced a decline of 17%/51% QoQ/YoY, clocking in at PkR2.5bn, due to decrease in short-term investments, which went to PkR38.4bn from PkR140.9bn in Jun’22 ((Down) 73%). For the full year, increase of 10%YoY in other income is attributable to interest rate hikes.

The effective taxation charge for the quarter amounted to PkR4.4bn, ETR: 53% vs 34% in the previous quarter, due to the retrospective implementation of super tax.

For the entire fiscal year, PAT reached PkR9.7bn (EPS: PkR123.0), down by 39%YoY from PkR15.8bn (EPS: PkR 201.0) in FY22, mainly due to reduced sales volumes and shrinking gross margins.

In addition, INDU announced cash dividend of PkR29/sh, taking the full year dividend to PkR71.8/sh.