Karachi: Indus Motor enhanced 1HFY12 profitability – HOLD
Indus Motors (INDU) rides on better sales i.e. 6% increase in sales from last year. The number of units sold till December 31, 2011 was 24,341 units as against 22,903 units in December 31, 2010.
INDU’s combined sales revenue for CKD, CBU and parts business amounted to Rs 33bn and hence profit after tax stood at Rs 1.77 billion on account of increased sales volume and cost efficiencies. The company’s EPS increased to Rs 22.48 in the period against Rs 11.55 reported in the same period a year back.
INDU has passed on an interim cash dividend of Rs 8/share. INDU yields FY12 PE of 5.3x as against auto assembler’s such as Pak Suzuki (PSMC) future PE of 5.5x and hence Standard Capital can only recommend ‘HOLD’ in INDU.
Auto industry trying to ward of tough situation
Some of the issues highlighted by the company include general economic problems such as
• Severe supply disruption due to Thai floods;
• Steep rupee devaluation;
• Increased cost pressures due to energy shortages; and
• Influx of used cars.
INDU being one of the premier assembler may ward of challenges to auto players in the country such as appreciating YEN against beleaguered rupee and resultant cost pressures, expiry of AIDP, correction in commodity prices which may influence rural buying, impact of ban on CNG cylinders given lack of gas in the country and thus decline in conversion kits imports and influx of imported used cars.
INDU is riding on better operational efficiencies to counter these challenges and thus maintaining pace of production numbers as against Atlas Honda which is still incurring loss.