Never running out of style, it would seem, Indus Motors (PSX: INDU) bragged an unapologetic earnings growth of 23 percent in FY22, after volumes grew 30 percent during the year that translated to revenues expanding 54 percent. In FY22, revenues stood at Rs275 billion which is an exceptional top-line.
Despite government efforts to curb automotive demand, volumes kept piling on during the year even as consumers faced massive inflation and shrinking purchasing power. The year was characterized by rising car prices, increased taxes and a higher cost of bank financing. Even so, growth remained far from curbed. The “other income” component showing customer advances stood at 51 percent of pre-tax earnings indicating a large number of growing new bookings and demand remaining intact against odds.
Estimating based on volumes achieved, the revenue per unit sold grew 18 percent during the year pointing toward the average price hike per unit while the cost per unit sold grew at a higher rate—21 percent—during FY22 year on year. This is because of rupee depreciation, high freight rates and inflationary pricing for inputs, most of which are imported. Numbers indicate that the company did not pass on the entire impact of increased costs onto consumers during the year at the cost of its own margins. Gross margins shrank to 7 percent from 9 percent last year.
In the first few months of FY23, the company already announced that it would be reducing the number of operational days on account of the SBP restrictions on attaining LCs. The company also stopped booking of new vehicles and told customers that it may not meet delivery targets. Such supply restrictions will likely see a volume shift downward. The company has reduced prices of its models after rupee appreciation which may be increased once again later on if rupee tumbles down against the dollar in the near- future.
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