INDU - The calm in the choppy sea,(AKD Daily, Apr 10, 2023)
AKD Daily
INDU: The calm in the choppy sea,
- As can be seen in recent quarters, the company’s profitability is largely being driven by non-operational factors, mainly Other Income generated on Short-Term investments. INDU’s profitability in 2QFY23 was aided by improvement in gross loss from -6.3% in 1QFY23 to -1.0% in 2QFY23, which can be attributed to the impact of increased prices during the period, albeit still standing in negative territory.
- The recent hikes are expected to start having the desired effect starting 3QFY23, wherein we expect the company to post gross margins of 2.41%. On a longer-term horizon, INDU’s gross margins are expected to average ~5% between FY24 and FY28, compared to 10% averaged in the past 5 years.
- The company’s ST investments and cash cumulatively stood at ~PkR66bn as at Dec’22, or PkR839.7/sh, corresponding to 94% of the stock’s last closing price. This strong liquidity position has shielded the company’s bottom line in the recent past, with the auto manufacturer being able to post net profits despite gross losses in the recent two quarters.
- The stock is currently trading at ~6.75 times its FY24 earnings, compared to a P/E of 6.44x averaged over the past 6 years. We have a “Hold” stance on the stock with a Dec’23 Target Price of PkR1,077/sh, which offers a potential total return of 26.3% from the last close including a 5.5% dividend yield.
AKD Research
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AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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