IGI Securities Limited – Flash Note

Karachi, April 23, 2019 (PPI-OT): Automobile Assemblers – Pak Suzuki Motor Company Limited – Increase in finance cost, weak margins and turnover tax eroded bottom line; company reported a loss of PKR 11.92/share for 1QCY19

Pak Suzuki Motor Company Limited (PSMC) announced its financial result for 1QCY19, reporting a loss of PKR 980mn (LPS: PKR 11.92) compared to profitability of PKR 904mn (EPS: PKR 10.99) witnessed during the same period last year.

Net sales increased up by +9%YoY to PKR 34.45bn during the quarter supported by price hike despite volumes inching down by 2.7%YoY to 42.4k units.

Gross margins for the quarter suffered a downfall of 500bpsYoY to 3.3%, which we believe is attributed to PKR depreciation and sales mix.

Major dent to the earnings came from increase in finance costs (4.45xYoY), stemming from short term borrowings availed (PKR 11.13bn) and interest rate hike.

Effective tax rate for the quarter increased to 85.5% owing to turnover tax rate.

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