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AGIL - FY23 & 1QFY24 Analyst Brifing Takeaway, (AKD Off the Analyst's Desk Nov 16, 2023)

AGIL held their analyst briefing earlier today to discuss FY23 & 1QFY24 financial results and future outlook. Following are the key takeaways of the call:

• To recall, AGIL reported a loss of PkR4.8/sh in FY23 compared to PAT of PkR20.5/sh in the previous year, where the recorded loss was primarily due to a decline in volumetric sales, reflecting the overall industry downturn.
• In 1QFY24, earnings were PkR0.17/sh, where the profit was primarily attributed to the reversal of certain provisions related to obsolescence, as per management.
• During the previous year, the company made significant investments, including 1) the addition of a new Auto-chrome plant with a total investment of PkR356mn, 2) expansion of the press shop at the Hub plant, incurring an estimated cost of PkR441mn, and 3) two new presses with capacities of 1000 and 800 tons were added at a cost of PkR1,041mn.
• As per management, over 50% of the company's sales come from INDU, while 8-9% is attributed to the after-sales market.
• Company operates on a cost-plus pricing model, where costs are shared with customers, and profit margins are fixed (in rupee terms). Management mentioned that the fixed cost portion is periodically revised (typically every 3-6 months). Meanwhile, the portions related to interest rates and exchange rates are revised every 2 months based on previous averages.
• The aforementioned approach helps manage costs, although rapid changes in interest rates and exchange rates can impact gross margins due to a lag in the revision rate.
• Company's primary raw materials consist of steel metal sheets, rods, pipes, and rubber, with the current major source being imports from Korea. Meanwhile, management stated that they have initiated an inquiry with a local metal sheet maker and is optimistic about increasing reliance on local resources.
• Moreover, the company has expanded its market reach to include exports. It exported a quantity in Jun’23 and secured a small order worth US$70k, scheduled for shipment in Dec’23.
• Looking ahead, the company continues to focus on expanding its export activities. It is actively seeking exemptions, especially considering that most of its products are proprietary with fixed territories.
• Moreover, management stated that they have commenced the supply of Corolla Cross products to INDU.