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PSMC: Out of the Woods

August 31, 2021 (MLN): Sharper-than-anticipated macro recovery in Pakistan benefitted Pak Suzuki Motor Company Ltd. (PSMC) as it has reported a financial turnaround, posting net profits of Rs1.1bn for 1HCY21, compared to the net loss of Rs935.45mn incurred in the corresponding period of CY20.

The Company has a legacy in the small/economy car segment since its inception. One of the most iconic cars of PSMC was ‘Mehran’ which is replaced by the new Alto, after its discontinuation.

The turnaround was driven by higher sales volume, a significant decline in finance costs, and higher Other Income pertaining to increasing customer advances and longer lead time.

During the period, sales revenue of the Company improved by a staggering 141% YoY from Rs27.48bn to Rs66.1bn, mainly on the back of lower financing rates and revival of economic activity which aided volumetric growth of 137% YoY to 50,096 units compared to 1HCY20 sales units of 21,117 units. As a result, the gross margins during 1HCY21 gross margins hit 6%, compared to a negative 0.1% in the same period last year (SPLY).

With regards to major expense heads, the company’s distribution and marketing expenses clocked in at Rs1.27bn, up by 124% YoY while the administration cost inched up to Rs1.33bn, an increase of 29% YoY. Similarly, the other expenses swelled upwards to Rs128.8mn, showing 140x YoY growth.

The Other income settled at Rs866.87mn, up by 345% YoY owing to a surge in cash and bank balances.

Furthermore, Finance cost witnessed a massive decline of 85% YoY to Rs292.58mn from Rs1.94bn on the back of lower debt levels along with lower financing rates.

In the recent budget, the government has reduced FED on all vehicles up to 3,000cc by 2.5% while abolished it on vehicles below 1,000cc. Sales tax was also slashed to 12.5% from 17% for cars up to 1,000cc. The government has also reduced ACD on all vehicles from 7% to 2%.

With the implementation of these measures, the demand for Economy segment cars is likely to remain robust as seen in July 2021, following price reductions. Gross margins are therefore likely to improve in the coming quarters, analyst at Intermarket Securities said.

However, the recent PKR/USD depreciation, Elevated shipping, and commodity prices may keep margins in check at current levels. Nevertheless,  on the back of strong order flows, and potential duty reductions in the upcoming Auto policy and broad macro improvement are likely to maintain sales growth for PSMC, he added.

In line with the profits, the earnings per share of the company clocked in at Rs14.54/sh as opposed to the loss per share of Rs29.92/sh.

Profit and Loss Account for the Half-year ended June 30, 2021 (Rs'000)




% Change





Cost of sales




Gross Profit



Distribution and marketing expense




Administrative expenses




Reversal/(provision) of impairment losses




Other expenses




Other income




Finance costs




Profit/(Loss) from operations



Share of loss of equity accounted investee




Profit/ (loss) before taxation






Net Profit/ (loss)for the period



Loss/ Earning per share  basic and diluted



Copyright Mettis Link News

Posted on: 2021-08-31T16:01:00+05:00


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