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Indus Motors plans to stick with current prices unless further devaluation occurs

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September 25, 2019 (MLN): Indus Motors, after experiencing 13% YoY decline in its yearly profits, the company held its analyst briefing session yesterday, to discuss its FY19 financial performance and future outlook.

To recall, the company announced its financial results on August 27, 2019, as per which its net profits after tax locked in at Rs 13.7 billion for FY19.

With regards to industry demand, the management briefed that despite 16% YoY decline in combined sales of new and used cars, Indus Motors sold 66.2k units (market share 22%) in FY19 as compared to 64k units (market share 18%) sold in FY18.

During the briefing session, the management also highlighted that the industry demand is badly impacted by the heavy taxation, as government has increased taxes to 42% of the sales price as compared to 37% charged previously.

Correspondingly, due to imposition of rigorous measures taken by the government to curb demand for imported vehicles, volumes for imported cars fell considerably to 36,455 units in FY19 versus 70,388 units sold in FY18.

Going forward, the management expects the auto industry to shrink by 30% in FY20 to 170k units, where the decline is augmented by rising interest rates, devaluation, imposition of Fed and overall demand contraction, highlighted in analyst briefing report by BMA Capital.

Furthermore, the management views current depressed scenario to persist longer than any crisis witnessed before by the industry. In light of the prevailing difficult scenario, the launch of new variant is unlikely to happen. Therefore, INDU has already started implementing non-production days from Jul 2019 onwards, as it has more than 2,000 units piled up, says another briefing report by Pearl Securities.

In terms of pricing, the management of the company apprised that as around 28-30% of INDU's sales is through auto financing which has fallen due to higher interest rates. For now, INDU plans to continue with current prices of vehicles unless further devaluation or higher than expected inflation occurs, reveals briefing report by Ismail Iqbal Securities.

Lastly, the management informed that around PKR20bn have already been incurred as capital expenditure for increasing vehicle production capacity.

Moreover, the management remained hopeful that the latest expansion project, expected to increase company’s capacity from 76k units to 90k units, would come online by end of CY20.

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Posted on: 2019-09-25T13:18:00+05:00

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