Even though, Indus Motors’ (PSX: INDU) market share has fallen since FY16, as new companies and new models made their launch into the Pakistani market, the company iscertainly trying to make a comeback. Not least from its earnings, which only ever truly waned in FY20 and FY23, and the former was an exceptionally difficult covid year, but more in terms of volumes. Whether the company faces direct competition from any players may be up for debate, but there is a general increase in competition which could eventually hurt market presence and may keep Indus Motors on its toes.
The outgoing year has been impressive considering the odds. Volumes recovered from last year, up 61 percent. As a result, revenues expanded by 41 percent leading to earnings rising by 53 percent in FY25 year on year. The company also improved its gross margins to 15 percent (from 13 percent), reduced its overheads and other charges to 4 percent of revenue (from 5%) and virtually no finance costs. Advanced bookings and other investments contributed to other income of 7 percent of revenue which more than covers expenses leaving before-tax earnings higher than gross profits. But let’s bring more context to these numbers.
Last year, an average vehicle sold Indus Motor cost Rs 73 lakhs (estimated by taking revenue per unit sold) which cost the company Rs64 lakhs (costs per unit sold). This year, both these numbers are down to Rs64 lakh and Rs55 lakh respectively. But let’s go back to the glory days. The year was FY22 and Indus Motors was flying high, to date selling the highest number of units ever sold at close to 75,000 with the highest revenue earned to date. The revenue for FY25 is 22 percent lower than that year.
The volumes are 55 percent lower than that year. And yet, the company has been able to grow its earnings by 46 percent compared to FY22. This is because average prices for Indus Motor vehicles are up 74 percent (using revenue per unit sold as the proxy).
The company is nowhere close to its volumetric peak and its still further away from its revenue peak, but by near doubling of prices, the company has kept floating above water. The other reason is the growing share of high margin vehicle sales, particulary Fortuner and Hilux. In FY22, the share of these in total sales was 12 percent which has grown to 24 percent in FY25.
Demand for SUVs have exploded the market, supplemented only by the electric and hybrid entries. While Indus Motors has market loyalty on its side, with Yaris fast gaining popularity, and Fortuner ever growing its market share, there is no denying that there is more variety in a market that was previously starved for it. In FY25, Sazgar has a market share of 7 percent with its Haval invading the Pakistani roads. The company made Rs16 billion in earnings this year.
Compare this to Indus Motors’ Rs23 billion in post-tax earnings and a market share of 23 percent. Though there may not be a ceiling to how much the market may expand in the coming years, given vehicle prices and average household incomes, there is a limit to how many SUVs Pakistani buyers will purchase. Soon there will be too many cooks in the kitchen cooking the same dish.
Comments
Comments are closed for this article.