IGI Securities Limited – Flash Note

Karachi, February 23, 2018 (PPI-OT): Automobile Assembler – INDU: Growth in volumes surged earnings for 2QFY18 by +23%YoY to PKR 3.74bn (EPS: PKR 47.53)

Indus Motor Company Limited (INDU) announced its financial result for 2QFY18 with earnings clocking in at PKR 3.74bn (EPS: PKR 47.53) up by +23%YoY as compared to PKR 3.03bn (EPS: PKR 38.51) in the same period last year. This takes cumulative earnings for 1HFY18 to PKR 7.36bn (EPS: PKR 93.69) up by +21%YoY supported by growth in volumes.

The company also announced a cash dividend of PKR 32.50/share along with the result taking total dividend to PKR 62.50/share for 1HFY18.

Net sales jumped by +25%YoY to PKR 32.10bn during the period supported by growth in volumes, especially in the high margin segment.

Gross margins for the quarter stood at 17.7%, slightly down by 57bps YoY which we believe is attributed to PKR depreciation and increase in steel prices. However, with sales inclined towards high margin segment during the quarter, negative impact emanating from sudden PKR depreciation (Dec-17) was partially offset, thereby keeping margins relatively intact on sequential basis.

Selling and distribution cost decreased by 7%YoY to PKR 270mn while admin cost leaped up by +76%YoY to PKR 404mn during the quarter.

Effective tax rate stood at 30.1% during 2QFY18 as compared to 32.1% in the corresponding period last year.

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