PSMC Corporate Briefing Session key takeaways

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Dear Clients,

Pak Suzuki Motor Company Limited (PSMC) held its briefing session today to discuss its financial performance of CY20 and 1QCY21 and provide an outlook on the operations of the company. To recall, PSMC had reported a LAT of PKR 1.6bn (LPS: PKR 19.31) in CY20 as against LAT of PKR 2.9bn (EPS: PKR 35.5) in SPLY. For 1QCY21, the company posted PAT of PKR 778mn (EPS: PKR 9.45) against LAT PKR 941mn (LPS: 11.44) in SPLY.

Key takeaways

– PSMC was able to sell 59,281 vehicles and 17,111 motorcycles during CY20. Vehicle sales were lower by 48% Y/Y as the pandemic outbreak hampered sales majorly during 1HCY20. Phasing out of Mehran further restricted volumes of the company.

– Revenues for the year stood at PKR 73.8bn compared to PKR 113.0bn last year. Drilling down the numbers, PSMC earned PKR 56bn less in revenues in CY20 compared to CY19 as a result of lower volumes. This was partially offset from better pricing on vehicles, improving revenues by PKR11.6bn.

– Amongst its lineup, Wagon R and Swift were the hardest hit vehicles with demand attrition. Vehicle sales of Wagon R and Swift were lower by 62% and 54%, respectively. Alto emerged as its leading vehicle in terms of sales, making up 40% of vehicles sold in CY20. 

– On the cost front, the company was impacted by PKR volatility that drove gross margins to 4.3% for CY20. During the year the company obtained a loan worth USD78mn from its parent company and raised short-term borrowing to finance its inventory of vehicles. Finance cost was up at PKR 2.7bn compared to PKR 2.1bn last year.

– 1QCY21 saw a turnaround in the profitability of the company with PAT of PKR 780mn compared to LAT of PKR 941mn with gross margins at 6% and net margins at 2%. The company’s cost of sales was largely influenced by heightened raw material costs and freight charges during the quarter.

– The company backs the development of the industry through hybrid vehicle policy deeming electric vehicle technology as infancy for the Pakistani market considering investments involved.

– We have an Outperform rating on PSMC. The stock is currently trading at one year forward P/E of 4.3x.

KASB Research

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