Millat Tractors Limited 1HFY17: Splendid bottomline

And Millat Tractors Limited (PSX: MTL) is back with a bang. The company has posted phenomenal results for 1HFY17 which saw a massive surge in its revenues year-on-year. MTL saw a 78 percent increase in sales on an unconsolidated basis which was attributable to rejuvenated demand in the agri-sector which had performed dismally last year.

Another factor that goes in favour for the company is CPEC and the increased use of tractors in the construction industry. The government also announced a decrease in the sales tax on tractors from 10 to 5 percent and various other policies to aid the agricultural sector which have an indirect but substantial effect on tractor sales.

In addition, the company has started exports with AGCO Corporation to Africa and is looking to expand its international market share on the back its cost competitiveness. According to the recently released PAMA numbers, tractor sales are up almost 129 percent year-on-year which indicates a promising time for tractor manufactures like Millat.

The companys gross profit tripled in comparison to 1HFY16 with the gross profit margin up by a massive 680 bps due to cost minimisation and the impressive 90 percent deletion rate MTL has been able to achieve. The distribution and marketing expenses double during the year indicating an aggressive marketing strategy to promote both exports as well as domestic sales.

The other income also increased by 56 percent with the impressive performance of subsidiaries including Bolan Castings Limited (BCL). The company witnessed a substantial decrease in finance cost as well with the overall impact on the bottomline being a 176 percent year-on-year increase. This meant the EPS increasing from Rs12.91 to Rs35.66 which gives a preview of the full year performance the company will pull off.

Lastly, Millat Tractors has also announced an interim dividend of Rs35 per share coupled with an announcement to explore opportunity of participation in the joint venture between Nishat Mills Ltd (NML) and Hyundai Motors Japan for assembly of cars in Pakistan.