INDU: Hefty other income and higher volumetric sales boost profitability by 2x

February 26, 2021 (MLN): Indus Motor Company Limited (INDU), has announced its financial results for 1HFY21 today, wherein the company reported more than twofold increase in net profits to Rs 4.8 billion from Rs 2.3 billion in the corresponding period last year.

Alongside results, the company also announced a cash dividend of Rs 37.00/share for the period mentioned above as opposed to the payouts of Rs 13/share declared in 1HFY20.

The Earnings per share of the company jumped by 108% YoY from Rs 29.32/share to Rs 61.08/share.

During the period, Net sales of the company increased by 86.2% YoY to Rs 79.6 billion mainly attributable to volumetric growth of 84% YoY to 26,139 units (Yaris 12,845 units, Corolla 8,427 units, Fortuner 1,247 units, Hilux 3,620 units) vs. 14,175 units (Corolla 11,742 units, Fortuner 552units, Hilux 1,881 units) in 1HFY20.

The higher volumetric sales were propelled by surge in auto-financing in lieu of lower policy rate and improvement in macroeconomic activity post lockdown.

Furthermore, despite rise in sales volume, the gross margin of the company declined slightly to 8% from 9% in the comparative period can be due to rise in CRC cost by 24% YoY during 1HFY21.

The profitability further boosted by 100% increase in other income from Rs 1.2 billion to Rs 2.45 billion on the back of significant increase in short term investment (government securities), and cash and bank balances.

On the cost front, despite expansion of marketing activities following the launch of Yaris earlier in March 2020, the company managed to keep its expenses lower by taking good cost control measures as its distribution expenses fell by 22.5% YoY, admin expenses by  6.6% YoY, and operating cost by 89% YoY.

While with regards to effective taxation, the company booked effective tax rate at 29% during the period under consideration compared to 28% in 1HFY20.

Overall, the easing of lockdowns and overall improvement in economy led to a surge in demand for the premium segment cars. INDU has also visibly benefited from rising rural demand (c.60% of total sales) given improving farmer income, a report by Intermarket Securities said.

With the recent PKR/US$ appreciation, it is expected that gross margins are likely to improve more meaningfully hereon, amid sustained demand for autos. Furthermore, Rise in auto financing and launch of new models can act as additional triggers, it added.

Financial results for the Half Year ended December 31, 2020 ('000 Rupees)

 

Dec-20

Dec-19

% Change

Net sales

                          79,645,782

                 42,775,279

86.20%

Cost of sales

                        (73,634,538)

               (39,008,106)

88.77%

Gross profit

                             6,011,244

                    3,767,173

59.57%

Distribution expenses

                              (571,726)

                     (737,681)

-22.50%

Administrative expenses

                              (645,115)

                     (691,006)

-6.64%

Other operating expenses

                                (10,540)

                       (95,834)

-89.00%

Workers' Profit Participation Fund and Workers' Welfare Fund

                              (391,468)

                     (236,779)

65.33%

Other income

                             2,456,506

                    1,226,920

100.22%

Finance cost

                                (58,285)

                       (37,984)

53.45%

Profit before taxation

                             6,790,616

                    3,194,809

112.55%

Taxation

                          (1,989,510)

                     (890,320)

123.46%

Profit after taxation

                             4,801,106

                    2,304,489

108.34%

Earnings per share – basic and diluted (Rupees)

                                     61.08

                            29.32

108.32%

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Posted on: 2021-02-26T11:16:00+05:00

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