In FY23, Indus Motor Company Limited (INDU) reported a Profit After Tax (PAT) of PKR 9.6 billion, with Earnings Per Share (EPS) at PKR 123. This marks a decline from the previous year when they achieved a PAT of PKR 15.8 billion and an EPS of PKR 201. The decrease in profits is primarily attributed to reduced sales volumes due to import restrictions and a contraction in demand.
The broader auto industry also experienced a significant decline, with auto sales decreasing by 57% Year-on-Year (YoY) to 163,476 units in FY23. Of these, Completely Built Unit (CBU) imports (including both new and used vehicles) amounted to 7,548 units, showing an 80% YoY drop. Similarly, INDU’s sales fell by 58% in FY23 compared to the previous year.
The company has noted that gross margins saw an increase in 4QFY23 due to one-time factors related to inventory, improved sales mix, and revised pricing. However, they anticipate that these margins will normalize in the future. Specifically, the company achieved a gross margin of 18% in 4QFY23, a significant improvement from the 1.2% gross margin in the same period of the previous year.
INDU emphasized that in the first half of FY23, they shielded their customers from car price increases despite incurring substantial exchange losses. Eventually, they expect to pass on the impact of the PKR devaluation to consumers, setting car prices based on a PKR/USD parity of 285.
The company has plans to introduce hybrid vehicles early next year, which will also lead to an increase in production capacity to a range of 76,000-80,000 units on a double shift. However, their sales estimate for FY24 is projected to be around 28,000-30,000 units.
The decision to introduce hybrid vehicles instead of fully electric vehicles is driven by the current lack of charging infrastructure and limited reliance on renewable energy sources. INDU emphasized Toyota’s unique position as the only player in the world offering a comprehensive range of vehicles, spanning from petrol-powered to electric options.
Looking ahead, the company anticipates that the persistent devaluation of the Pakistani Rupee (PKR) against the US Dollar, along with high inflation, increased taxes, and higher interest rates, will likely erode consumer purchasing power, potentially impacting automotive sales in the near future.
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