Panther Tyres Limited (PSX: PTL) was incorporated in Pakistan as a private limited company in 1983 and was converted into public limited company in 2003. The principal activity of the company is the manufacturing and sale of tyres and tubes for vehicles.
Pattern of Shareholding
As of June 30, 2024, PTL has a total of 168 million shares outstanding which are held by 3735 shareholders. Directors, CEO, their spouse and minor children have the majority stake of 75.22 percent in the company followed by local general public holding 11.76 percent shares of PTL.
Modarabas & Mutual Funds account for 5.20 percent shares of the company while associated companies, undertakings & related parties hold 4.43 percent shares. Around 1.37 percent shares of PTL are held by Insurance companies. The remaining shares are held by other categories of shareholders.
Financial Performance (2021-24)
PTL’s topline has followed an upward trajectory over the period under consideration, however, its bottomline, after registering a staggering year-on-year growth in 2021, posted decline in the subsequent two years.
In 2024, PTL’s bottomline ticked up. PTL’s margins also attained their optimum level in 2021 followed by a plunge in 2022. In 2023 and 2024, gross and operating margins rebounded while net margin continued to slide. The detailed performance review of the period under consideration is given below.
In 2021, PTL’s net sales grew by 39.86 percent year-on-year to clock in at Rs.16.202.07 million. This came on the back of superior sales to both OEMs and local and export replacement markets.
During the year, the company’s export sales grew by 54 percent year-on-year as the company tapped new geographical markets and added new products to its sales mix. In 2020, the company launched truck bus bias tyre (TBB) and in 2021 the company launched the largest and the heaviest tyre in the OTR category.
As of 2021, PTL exported motorcycle, tractor, rickshaw, LCV, truck and bus tyre tubes to 12 countries across the globe. Export sales constituted 8.3 percent of PTL’s sales mix in 2021 versus its share of 7.6 percent in the previous year.
The company operated at an average capacity of 89 percent in 2021. However, to meet the rising demand the company undertook major expansion plans particularly in the tractor, TBB and OTR segments.
Cost of sales grew by 38.59 percent in 2021. Besides implementing cost control measures and achieving operational efficiency, the company passed on the impact of cost hike to its consumers, resulting in 47.33 percent year-on-year growth in gross profit in 2021 with GP margin inching up from 14.48 percent in 2020 to 15.25 percent in 2021.
Distribution expense mounted by 40.16 percent in 2021 on account of increased spending on marketing and advertising to enhance the company’s brand equity. Administrative expense ticked up by 13.47 percent in 2021 due to increased payroll expense as PTL enhanced its workforce from 2493 employees in 2020 to 3038 employees in 2021. 193.30 percent year-on-year surge in other expense in 2021 was the result of hefty provisioning done for WWF and WPPF.
Other expense was partially offset by 550.37 percent higher other income registered by PTL in 2021. This was due to grant income on SBP refinance scheme, elevated profit on TDRs and higher gain on sale of property, plant and equipment recorded in 2021. Operating profit rebounded by 58.29 percent in 2021 with OP margin rising up from 8.44 percent in 2020 to 9.56 percent in 2021.
PTL was able to cut down its finance cost by 45.15 percent in 2021 due to monetary easing. While the company outstanding liabilities considerably mounted during the year, the issuance of shares during the year resulted in a gearing ratio of 17 percent in 2021 versus gearing ratio of 18 percent recorded in the previous year.
Net profit grew by 283 percent in 2021 to clock in at Rs.851.26 million with EPS of Rs.5.07 versus EPS of Rs.2.52 posted in 2020. NP margin climbed up from 2.17 percent in 2020 to 5.25 percent in 2021.
In 2022, PTL registered 26.28 percent year-on-year rise in its topline which clocked in at Rs. 20,460.23 million. This came on the back of improved performance in both OEM and replacement markets. Export sales posted 38 percent year-on-year growth in 2022, standing at 9.1 percent of PTL’s sales mix.
Cost of sales hiked by 32.29 percent year-on-year in 2022 due to spike in the prices of imported raw materials which was further exacerbated by Pak Rupee depreciation and elevated energy prices. Gross profit slid by 7.69 percent in 2022 with GP margin falling down to 11.15 percent.
Distribution expense magnified by 18.31 percent in 2022 due to export expense, travel & transport charges as well as payroll expense.
Due to continuous expansion, the company hired new employees, taking the tally to 3167 employees in 2022. This resulted in higher payroll expense which pushed the administrative expense up by 22.56 percent in 2022. Considerable cut in profit related provisioning resulted in 24.15 percent dip in other expense in 2022.
Other income built up by 355.96 percent in 2022, offsetting other expense by a huge margin. Robust other income was due to higher profit on TDRs, impact of IFRS-9 on directors’ loan and grant income on TERF for the import of plant & machinery. PTL registered 12.55 percent thinner operating profit in 2022 with OP margin of 6.62 percent – the lowest during the period under consideration.
Finance cost escalated by 98 percent in 2022 due to higher discount rate coupled with huge borrowings obtained by the company under TERF/LTFF arrangements for financing the import of machinery and also under working capital arrangements.
Gearing ratio surged to 25 percent in 2022. PTL registered 46.26 percent downtick in its net profit in 2022 which clocked in at Rs.457.457 million with EPS of Rs.2.72 and NP margin of 2.236 percent.
Amid lower sales to OEMs due to depressed economic and political outlook, shrunken pockets of consumers and import restrictions, topline growth of 4.41 percent registered by PTL in 2023 came on the back of local and export replacement market sales which comprises of retailers, wholesalers and distributors.
PTL’s net sales clocked in at Rs.21,363.40 million in 2023. The company improved its export sales by 67.88 percent year-on-year in 2023 with the addition of new countries and new products in its export portfolio. PTL’s export market comprised of 14 countries in 2023. Export sales stood at 14.57 percent of the company’s sales mix in 2023.
Growing share of export sales, Pak Rupee depreciation and upward revision in prices resulted in 36 percent year-on-year enhancement in gross profit in 2023 with GP margin climbing up to 14.52 percent. 35.53 percent higher distribution expense incurred by the company in 2023 was on account of increased marketing and branding expenditure to enhance its penetration in the local and export markets.
Administrative expense slid by 2 percent in 2023 as the company streamlined its workforce to 2994 employees. 188.82 percent taller other expense in 2023 was due to unwinding of directors’ loan although PTL considerably slashed its profit related provisioning during the year.
Other income shrank by 51.65 percent in 2023 due to high-base effect as the company recorded grant income on TERF as well as impact of discounting of IFRS-9 on directors’ loan in 2023.
Operating profit improved by 25.12 percent in 2023 with OP margin picking up to 7.93 percent. Finance cost surged by 61.35 percent in 2023 due to monetary tightening. During the year, the company implemented financial discipline across its value chain which greatly reduced working capital requirements. Net profit tumbled by 5.39 percent to clock in at Rs.432.793 million with EPS of Rs.2.58 and NP margin of 2.02 percent.
PTL posted 38.20 percent year-on-year growth in its topline which clocked in at Rs.29.523.19 million in 2024. This was on the back of improved performance across categories – OEM, export and replacement markets.
During the year, the company increased the production capacity of its tyre and tube segments by 20 percent and 29 percent respectively to cater to enhanced demand. Share of export sales in the total sales mix of PTL dipped to 12.075 percent in 2024 on the back of appreciation in the value of Pak Rupee.
Operational efficiency and periodic price increases resulted in 38.68 percent improvement in gross profit during 2024 with GP margin rising up to 14.57 percent. 51.26 percent higher distribution expense incurred in 2024 was the effect of increased spending on brand equity, higher salaries of sales force and increased travelling & conveyance charges incurred during the year.
Administrative expense inched up by 10.14 percent in 2024 in line with inflation and also because of workforce expansion to 3226 employees. Other expense plunged by 10.17 percent in 2024 as unlike the previous it didn’t record unwinding of directors’ loan in 2024. This was despite the fact that company incurred exchange loss of Rs.25.192 million and higher profit related provisioning in 2024.
PTL recorded 13.45 percent higher other income in 2023. This was mainly on account of gain on the disposal of property, plant & equipment and miscellaneous income recorded in 2024.
Operating profit strengthened by 40.70 percent in 2024 with OP margin clocking in at 8.1 percent. Increased utilization of working capital lines coupled with monetary tightening pushed up finance cost by 41.94 percent in 2024.
Gearing ratio rose from 32 percent in 2023 to 35 percent in 2024. Net profit picked up by 7.62 percent to clock in at Rs.465.786 million in 2024 with EPS of Rs. 2.77. NP margin dropped to its lowest level of 1.58 percent in 2024.
Recent Performance (9MFY25)
PTL’s net sales improved by 8.74 percent to clock in at Rs.23,305.16 million in 9MFY25. While the sales to OEM segment remained under pressure due to 1.8 percent contraction recorded in LSM growth, the company was able to offset the effect of the same by achieving increased volumes in replacement and export markets.
Sharp spike in raw material and energy prices, the company’s inability to pass on the impact of cost hike to its customers due to petite demand and appreciation in the value of local currency which squeezed the margins of export sales – all pushed down PTL’s gross profit by 10.88 percent in 9MFY25.
GP margin also fell from 14.98 percent in 9MFY24 to 12.28 percent in 9MFY25. Distribution expense shrank by 18.52 percent in 9MFY25 seemingly due to lesser spending on advertisement & promotion. Conversely, administrative expense mounted by 26.20 percent in 9MFY25 on account of inflationary pressure which pushed up the payroll expense. Lower profit related provisioning appears to be the cause behind 41.70 percent slide in other expense recorded in 9MFY25.
Other income inched up by only 0.76 percent in 9MFY25, however, it easily offset PTL’s other expense. Operating profit tumbled by 11.14 percent in 9MFY25 with OP margin slipping from 8.83 percent in 9MFY24 to 7.21 percent in 9MFY25. Finance cost inched up by 6.72 percent in 9MFY25 despite monetary easing. This was on account of increased external borrowings.
PTL recorded 41.31 percent thinner net profit to the tune of Rs.322.607 million in 9MFY25. This translated into EPS of Rs.1.92 in 9MFY25 versus EPS of Rs.3.27 recorded in 9MFY24. NP margin also dwindled from 2.57 percent in 9MFY24 to 1.38 percent in 9MFY25.
Future Outlook
Downtick in inflation, softening of international commodity prices and downward revision of discount rate will bode well for the automobile industry. This coupled with improved demand in the summer season will result in robust business activity.