INDU hints at another price hike on higher freight costs

March 18, 2022 (MLN): Indus Motors (INDU) is likely to announce another price hike in the range of 12%-15% within two weeks on the cost for higher freight charges, the management disclosed during the corporate briefing.

However, the management is still under discussion internally and considering not to pass on this price escalation impact for balance orders of up till June’22.

Currently, the management has 3-4 months of order backlog. However, a 15-20% slowdown is expected due to higher inflation coupled with a rising auto financing rate, according to key takeaways covered by Insight Securities.

To recall, the bottom line of the company had expanded by around 2x to stand at Rs10.17 billion during 1HFY22, against Rs4.8bn recorded in 1HFY21. The upsurge in INDU’s profitability was mainly attributable to a 70% YoY increase in sales revenue amid higher volumetric growth of CKD and CBU units.

The sales volumes remained impressive; however, the company anticipates demand to receive a hit during FY23 as an outcome of elevated interest rates, stringent auto financing conditions together with bloated Current Account Deficit; which will further exert pressure on the exchange rate. Due to the aforementioned reasons, the management is estimating sales volumes to take a dip of around 10-15%. As a response to this, the company is currently operating on lower volumes, a report by Arif Habib said.

Speaking of issues currently being faced by the company, the management mentioned that they are dealing with massive supply chain issues amid delays in parts and a hefty enhancement in freight costs which is causing a major obstacle in running a smooth operation and contributing to delayed deliveries. Meanwhile, the continuous PKR depreciation also poses a major downside to gross margins in the coming quarters.

With regards to the company’s HEV project, the management expects to manufacture the first locally assemble a hybrid car by June’24.

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