Indus Motors drives it safe and smooth

Automobile industry is very cyclical in nature; the performance of the sector can be gauged through seasonal trends, like new models, price revisions, interest rate, and even fashion could have its own influence over what moves on the roads.
Sector play period - the time when industry fundamentals become attractive or unattractive for investors - for automobile industry began sometime in June last year, after interest rates began easing and auto demand started to pick up.
But now it is time for the stock selection period, where Indus Motors Limited (INDU), in the light of its latest first half results, becomes a natural attraction.
INDU has proved to be the most sound company in the automobile industry, as the firm was able to maintain its growth even in the face of struggling economy. This is mainly due to the product series offered which is focused towards the high-end consumer segment.
Triggered by the overwhelming response for Toyota Corollas latest model, half-yearly profits jumped eight folds enabling the firm to treat its investors with a cash dividend of Rs5 per share.
The abnormally high growth in profits stems mainly from the low base affect of last year as sales volume jumped 58 percent in the six months ended December. Moreover, an average 10 percent increase in sales price, year-on-year, coupled with lower realized steel prices boosted the firms gross margins to 8 percent.
INDUs bottom-line was also cushioned by higher other income, as advance bookings from customers led to a hike in the companys cash balance.
The firm has recently announced a further increase in product price by 3 to 5 percent for its various models. The move would allow the company to counter cost pressures, if any, hence, enabling to sustain its gross margins in the upcoming quarters.

====================================================================

Indus Motor Company

====================================================================

Rs (mn)         1HFY10   1HFY09    chg(%)   2QFY10   2QFY09   chg(%)

====================================================================

Sales           24,079   14,438     67%     12,143    9,278      31%

COGS            22,201   13,996     59%     11,279    9,012      25%

GP               1,878      442    325%        864      266     225%

GP Margin            8%      3%    155%         7%        3%    148%

Other Income       857      232    270%        434      128     241%

Finance Cost        93       10    865%         84        8     904%

PBT              2,102      231    809%        935      173     440%

PAT              1,366      163    739%        607      115     429%

EPS (Rs)         17.38     2.07               7.72    1.46

====================================================================

Source: KSE Notice