INDU: Yaris still an ace up the sleeve, (AKD Daily, Mar 11, 2020)
AKD Daily
INDU: Yaris still an ace up the sleeve
- INDU’s detailed accounts reveal a tough operating backdrop where the OEM posted 2QFY20 NPAT of PkR986mn (EPS:PkR12.54/sh) lower by 25%QoQ/71%YoY slightly lower than our estimate, primarily on the back of GM slippages as the firm contends with a tough consumer durable demand backdrop
- Perusing through detailed accounts for 1HFY20 we flag significant CAPEX, with additions to PPE centered on Jigs & moulds, indicative of Yaris launch (PkR1.6bn during 1HFY20 constituting 90% of additions during 1HFY20) and significant depletion in margins, with manufacturing margins squeezed further in the single digits (5.7% for 2QFY20 vs. 7.4% in 1QFY20) as dampening free cash flow
- Going forward, the normalization of working capital cycle coupled with the imminent launch of the Yaris (impacting profitability estimates from 4QFY20 onwards), where we adjust our profitability forecasts, with EPS for FY20/21F settling at PkR68.3/102.6/sh.
- Following on from the same and amidst the confirmed Yaris launch (a topic we last covered on Dec’19), the current stock price translates to a FY20/21 P/E of 14.7/9.8x. At these amended earnings our TP for the stock amounts to PkR1,375/sh implying upside of 36.6% and a BUY call.
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
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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