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NCL & PSMC - Result Previews, (AKD Daily, Feb 27, 2023)

AKD Daily

NCL  & PSMC - Result Previews

 

NCL—2QFY23 loss of PkR0.2/sh expected: Nishat Chunian Limited (NCL) is scheduled to announce its 2QFY23 earnings tomorrow, wherein the company is likely to post a loss of PkR46mn (LPS: PkR0.2), compared to a loss of PkR131mn reported in the earlier quarter. Our earnings expectations incorporate a sequential drop in NCL’s topline, expected to clock in at PkR14.2bn, 7% lower than that reported in 1QFY23, driven by lower export orders during the period. Earnings are expected to be further dented by lower gross margins as the company has likely procured higher-cost inventory during the quarter. Resultantly, we expect the gross margins for the quarter to come in at 10.8% in 2QFY23, compared to 11.2% in the previous quarter. Furthermore, finance costs are expected to clock in at PkR1.1bn (70% of gross profit) during the quarter, driven by higher interest rates in the country and higher working capital financing requirement during the quarter. Some respite is expected to come in the form of lower taxation during the period, expected to clock in at PkR111mn for the three-month period, compared to PkR175mn reported in the earlier quarter.

 

PSMC – CY22 losses to clock in at PkR33.6/sh: We expect Pak Suzuki Motor Company (PSMC) to post a LAT of PkR255mn (LPS: PkR3.1) in the closing quarter of CY22, decreasing by 90%QoQ compared to a loss of PkR2.5bn (LPS: PkR30.2) in the last quarter, while the company posted a profit of PkR5.9/sh in the SPLY. This will take cumulative CY22 losses to PkR2.8bn (LPS: PkR33.6), capping off a woeful year for the company, where losses for the year are expected to erode the company’s Book Value by 10.3%YoY. This year will see PSMC post record revenues, with all-time high net sales of PkR199.9bn (+25%YoY) on the back of volumes increasing by 3%YoY to record at 125,947 CKD units sold, and multiple revisions in prices for the company’s offerings covering the distance. Moreover, margins for the quarter should remain flat, clocking in at 5.1% compared to 5.2% in 3QCY22, as slightly higher effective prices are offset by high inflation and minor devaluation in the local currency. Other income is expected to come at PkR261mn for the quarter, decreasing substantially compared to the PkR1.1bn recorded in the last quarter as cash balances significantly decreased owing to the hefty losses recorded previously in the year. Finance costs are likely to clock in at PkR1.8bn, driven by the demurrage and detention charges that should apply for October along with the usual markup on late deliveries. Lastly, we do not foresee a dividend payout for the final quarter of the year as the company has seen a major dent in its equity owing to the substantial losses suffered in the year as aforementioned.

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