Corporate Briefing: HINO plans to issue Right Shares of PKR 2.9bln to finance working capital needs

September 23, 2020 (MLN): Hinopak Motors Limited (HINO) held its Corporate Briefing recently to discuss the recent financial performance along with the future outlook of the company.

During 1HMY21, the company had incurred losses amounting to nearly Rs 442 million, up by 32% YoY whereby it reported a gross loss of Rs 122 million on an account of lower volumetric sales and hike in production costs amid PKR devaluation and imposition of customs duty.

Moreover, due to the economic slowdown amid the COVID-19 pandemic, HINO is unable to pass on the increased cost to customers in full.  

According to a report by Taurus Securities, the management is bearish on the outlook for MY21, as in the last five months, HINO’s volumes were just 113 units, showing a decline of 78% YoY.  The company does not foresee an uptick in demand for the rest 7 months.

Speaking of an increase in demand in FY17 & FY18, the management informed it was the result of the positive sentiment for CPEC, due to which customers had bought trucks in excess of their demand previously.

The company’s 15-20% of sales as per the research report, are on lease. However, lower interest rates are still not enough to improve demand significantly.

Talking about its plans, the management believed that the company will witness recovery in trucks’ demand due to construction activities but with a sufficient lag. It also informed HINO is going for the Right Issue of PKR 2.9 billion which will be utilized for working capital requirements and for paying back its short-term borrowings. This will in return lower finance costs, the report mentioned.

As per a report by Taurus Securities, the management is actively working for settling its working capital needs, which can be witnessed from lower inventory levels and lower short-term borrowings as compared to the past.

Further, the management informed the imported market is very insignificant. HINO holds a 40% share of the overall market and 70% and 60% for Heavy Trucks and Buses, respectively. HINO also fulfills 70% of the demand for trucks by the PAK Army.

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