Mighty Indus rages on

The mighty Indus rages on. Indus Motor Company (INDU) that is. FY12 began with great tidings for the countrys auto assemblers in the form of reductions in GST and SED taxes and the consequent upsurge in the demand for cars has persisted throughout the first nine months of this fiscal year.
The latest result posted by INDU exhibits this strength in demand as the companys net sales increased by 19 percent to Rs54 billion in 9MFY12, compared to the same period last year. However, the real kicker came in the gross profit which shot up by a whopping 72 percent in the first nine months of the current fiscal to Rs4.3 billion, compared to Rs2.476 billion in the same period last year.
The improved gross margins of the company are owed in large part to an increase of 61 percent in the sales of Hilux, on which the company enjoys relatively higher margins. Sales of Hilux towered to 2,858 units in the first nine months of this fiscal, compared to 1,776 units during 9MFY11.
On the flipside, sales of Cuore, which rakes in the lowest margins for the company, have dropped by 32 percent to 3,186 units in the period under consideration. "The company will discontinue Cuore from June and has already stopped taking bookings on it because it was not satisfied with the margins on the model," commented InvestCap analyst Abdul Azeem.
And since customers kept lining up outside showrooms to buy the companys cars, INDU laughed all the way to the bank, earning a hefty Rs1.3 billion in the form of other operating income; largely attributable to the interest earned against advances received from customers and deposited with banks.
As the cash rolling in picked up pace, the companys expenses grew by a relatively slower pace. Cost of sales only expanded by 16 percent in 9MFY12 compared to the same period last year. Similarly, while administrative expenses shot up by 37 percent to Rs421 million, the company managed to keep distribution expenses tamed, which increased only by one percent in the period under review to Rs508 million.
This brings us to the bottom line, which really presents the icing on the cake for INDU. The companys profit after tax mushroomed by 81 percent in 9MFY12, compared to the same period last year, to reach almost Rs3 billion.
Industry analysts had predicted that the recent ban on the import of CNG cylinders would adversely impact the demand for cars. However, it appears that INDUs customers are not bothered with this hitch. Given the fact that production of both Hilux and Corolla is also scaling up, it seems the company is not very concerned about any adverse impact on sales either.

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INDUS MOTOR COMPANY LTD

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Rs(mn)                     9MFY12    9MFY11    Chg

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Net Sales                  53,934    45,288    19%

Cost of Sales              49,673    42,811    16%

Gross Profit                4,260     2,476    72%

Gross Margin                   9%        6%    N/A

Distribution Expenses         508       503     1%

Administrative Expenses       421       308    37%

Other Operating Income      1,342     1,108    21%

PAT                         2,894     1,603    81%

EPS(Rs)                     36.82     20.39    81%

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Source: Company Announcement