Karachi, August 30, 2022 (PPI-OT): INDU: FY22 Result Review

Indus Motor Company Limited (INDU) announced its FY22 result today where it posted a NPAT of PkR509mn (EPS: PkR6.5) in 4QFY22, down by 90%QoQ and 88%YoY. This brings cumulative FY22 earnings to PkR15.8bn (EPS: PkR201.0), up 23%YoY. The result is well below our expectations (4QFY22 EPS: PkR42.1/sh) as well as the market’s owing to a decrease in gross margins.

The company recorded PkR72.1bn in revenue for the final quarter of the year, increasing by 6%QoQ while up 50%YoY and is in line with our expectations. Hence, revenue for FY22 has clocked in at PkR275.5bn (+54%YoY).

Gross profit for 4QFY22 is PkR837mn (-84%QoQ/-86%YoY) on the back of substantially low gross margins, clocking in at 1.2% for the quarter. To recall, gross margins in 3QFY22 were 7.7% while margins for 9MFY22 were 8.6%. We believe the margins have decreased this quarter on the back of higher freight costs along with currency devaluation. Cumulative gross profit for FY22 is PkR18.4bn, increasing by 11%YoY.

The company has recorded other income of PkR5.2bn in the quarter owing to strong holdings in ST investments and cash balances along with elevated interest rates. This brings total other income for the year to PkR12.9bn (PkR164.6/sh), up 132%YoY. Other income has become the core driver of earnings in FY22, contributing to 82% of the NPAT, while contribution to earnings in FY21 stood at 43%.

Taxation for the final quarter of the year is PkR3.8bn (ETR: 88%) due to the expected adjustment for the 10% Supertax applicable on the earnings of FY22. Hence, total taxation for FY22 has clocked in at PkR9.7bn, with an ETR of 38%.

The company announced final cash dividend of PkR3.3/sh, taking cumulative dividends during the year to PkR93.8/sh with a payout ratio of 47%.