INDU likely to hike prices on falling rupee, rising freight costs

September 15, 2021 (MLN): Indus Motor Company Ltd (INDU) held its analyst briefing yesterday to deliberate its financial and operational performance for FY21 along with the future prospects of the company.

To note, the company had made net profits of Rs12.83 billion in FY21, showing an extraordinary growth of 2.5x YoY when compared to net profits of Rs5.08bn reported in the same period last year (SPLY). This remarkable growth was mainly attributable to higher sales volume due to a surge in demand following the lockdown amid sharp economic recovery, stable rupee and lower production cost amid economies of scale.

The management of the company expects the demand to remain robust amidst a low-interest-rate environment, rising farmers’ income and a general increase in domestic travel on the back of existing international travel restrictions, as per the key takeaways covered by AKD Securities.

Throwing light on the company’s sales if SBP increases the policy rate, the management said it doesn’t expect any adverse effect on its sales as auto financing share of sales is on the lower end because of high market penetration in the rural region while it has a balanced sales mix between rural and urban which is around 50-50.

However, in light of the recent PKR depreciation against USD by 6.75% in FY22, rising international commodity prices, higher freight charges along with port congestions globally (resulting in 2–3-week delays and air shipments), the management of INDU indicated that prices of vehicles are likely to be increased to maintain margins. The company is presently absorbing all cost escalations.  

The company requested the government to reduce the Additional Custom Duty (ACD) on raw material and components imported by vendors and also to reduce FED on Double Cabin Pick-ups as well, as it is currently creating a disparity in comparison with other motor vehicles.

Recently, the company announced its plan to invest an estimated aggregate amount of US$100 million, over the period of the next 3 years, for the local production of Hybrid Electric Vehicle (HEV) in Pakistan. Although the management did not reveal the model to be launched, AKD research expected the next generation of Corolla to be propelled in the hybrid variant.

Regarding the global shortage of semiconductor chips, the management is optimistic to fulfill around 90% of its demand in FY22 despite the supply constraints due to substantial negotiating ability with Toyota Japan for the timely procurement of chips.

The company is presently operating on double shifts with overtime to fulfill the growing demand for Toyota cars.

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Posted on: 2021-09-15T15:44:07+05:00

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