Indus Motors: Fortuner to shape fortunes?

With its market share in the 1300 cc segment dropping to 57 percent in 9MFY13 from 72 percent in the corresponding period last year, Indus Motors clearly appears to be in hot waters.
The hopes pinned on the new Corolla model launched earlier this fiscal year couldn materialise as evident by a 33 percent year-on-year slide in Corollas sales. Besides, the discontinuation of its non Euro-II compliant car - Cuore, kicked the company out of below1000cc segment, adding further to its woes.
Flogged by the aforesaid miseries, a 21 percent year-on-year slide in Indus Motors top line comes as no surprise. A tremendous 33 percent decline in the sales volume masked any potential improvement that the raised car prices could pour in to the companys top line.
Zoya Ahmed, Research Analyst at BMA Capital told BR-Research that the recent nine monthly results failed to depict the much anticipated gains of Pak Rupee against Japanese Yen due to the formerly undertaken forward currency contract positions by the company.
Furthermore, the constant depreciation of Pak Rupee against US Dollar which forms the other leg of the transaction, continued to counterbalance the gains, thus dragging the margins. Going forward, as those contracts expire; the companys margin is expected to step up, owing to a sizeable dip in its cost.
Besides the weak top line producing a trickle down impact on the companys profits, operating expenses also raised their heads during the period, which might be due to the advertising campaigns undertaken to launch new Corolla model in September.
The monetary easing phenomenon ongoing in the country bore both positive and negative results for the company. On the positive note, its financial cost faded, giving companys grappling bottom line a much needed respite. On the negative side, its other income almost halved, further battering Induss bottom line.
Amid company facing headwinds, a silver lining appears in the form of "Fortuner", the only locally assembled SUV launched by the company in March with a much lesser price tag than its imported substitute. Fortuner boasted a staggering sales volume of 231 units in just a month, giving company a reason to look ahead to a bright future.
On the imports front, with the reduction in the age-limit of imported cars, the import duty has puffed-up manifold, forcing the customers to turn their gaze towards the locally manufactured variants.
Moreover, the inventory of the cars imported before the age limit reduction, is fading as the industry moves ahead, with its real impact on the local sales volume expected to appear from FY14 onwards. However, the risk of reversal in the age limit decision in the AIDP-II looms over the local auto industry as a down-side risk to its sales volume.

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Indus Motors Company Ltd.

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(Rs mn)                              chg      9MFY13      9MFY12

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Sales                               -21%      42,696      53,934

Cost of Sales                       -20%      39,617      49,673

Gross Profit                        -28%       3,079       4,261

Distribution & Marketing Cost        15%         586         509

Administrative expense               12%         470         421

Other operating income              -46%         729       1,343

Profit/(Loss) from operations       -41%       2,535       4,327

Profit/Loss after Taxation          -40%       1,730       2,894

EPS (Rs)                                       22.01       36.82

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Source: KSE Notice