KARACHI: Pak Suzuki (PSMC) recorded a significant growth in its bottom line during nine months of calendar year 2011 (9MCY11). According to present analysis of 9MCY11 financials, PSMC posted 73 percent year-to-year (YoY) growth in profit after tax (PAT) in said period 9MCY11.
The bottom line of PSMC grew by a massive 73 percent YoY to Rs 672 million (EPS Rs 8.16) during 9MC Y11. This is mainly due to 17 percent YoY increase in volumetric sales coupled with increase in sales price by an average 7.5 percent during the said period.Moreover, a modest growth of 5 percent YoY in other income also helped in boosting the company’s bottom line.
Despite the increase in vehicle prices, margins of the company remained largely intact, as gross margins grew by a minimal 0.7 percent YoY to 3.8 percent and operating margin grew by 0.8 percent YoY to 1.9 percent. Moreover, net margins of the company inched up by only 0.5 percent YoY to 1.7 percent during the 9MCY11.With the depressed Pak rupee against the major currencies, production cost of the company was the major concern. In this regard, JPY appreciated by 13 percent YoY, while international steel prices were up by 20 percent YoY during 9MCY11. Both of the factors remained a big challenge as around 60 percent of the parts come from Japan, while steel is the major raw material of the company.
During 9MFY11, the company’s sales volumes improved by a massive 17 percent YoY to 68 thousands (k) units. During the said period, PSMC’s Mehran car sales augmented by a huge 24 percent YoY to 20.9k units. PSMC’s another variant, Swift also posted a hefty growth as its sales were up by a gigantic 47 percent YoY to 4.4k units.Moreover, Alto, Bolan and Ravi also posted a substantial growth of 14 percent YoY to 9.8k units, 20 percent to 10.9k units and 18 percent YoY to 11.96k units respectively during 9MCY11. However, Liana and Cultus posted a decline of 22 percent YoY to 438 units and 2 percent YoY to 9.5k units respectively during January-September 11 period.
Due to weakness of the Pak rupee against major currencies and rise in the international steel prices, PSMC’s gross margins would remain stagnant during CY11, while the government of Punjab’s Yellow Cab Scheme would help the company improve its Mehran and Bolan sales during remaining part of the CY11.At current level, analysts recommend ‘Hold On’ PSMC with the target price of Rs 77 per share. Currently, PSMC is trading at a PE of 7.9x with a dividend yield of 3.5 percent for 2012. – Dailytimes
