FLASHNEWS:

AKD Securities Limited – AKD Daily (September 28, 2022)

Karachi, September 28, 2022 (PPI-OT): INDU: Weathering the storm

Indus Motor Company Limited posted earnings of PkR15.8bn (EPS: PKR 201.0) during FY22, up 23%YoY from PkR12.8bn (EPS: PkR163.2) in FY21. The fall earnings in 4QFY22 was a result of lower gross margins (1.2%) and higher taxation due to the imposition of Supertax.

The Indus Motor Company held its corporate briefing yesterday, where it reviewed the year ended Jun’22. In light of the measures taken by the SBP on CKD imports, INDU is currently operating at utilization levels 45-50%. The management further expects a ~40% decline in industry sales owing to supply-side constraints along with demand destruction.

Furthermore, the company expressed that it is difficult to break-even in 1QFY23, as the deliveries are being made on old prices while the US$/PkR parity has shot up along with higher freight costs. Lastly, the US$100mn investment plan on the HEV is on track, with the company set to launch the Toyota Cross in 2HFY23.

We have revised our stance on INDU to “Neutral” with a Jun’23 target price of PkR1,099/sh, offering an upside of 15.1% along with a D/Y of 2.8%. We expect the company to post earnings of PkR7.0bn (EPS: PkR89.5/sh) in FY23, owing to depleted gross margins of 3.9% along with a 43%YoY decline in volumes to ~43k units.