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PTL - FY23 Analyst Brifing Takeaway, (AKD Off the Analyst's Desk Oct 26, 2023)

AKD, Off the Analyst's Desk

PTL - FY23 Analyst Brifing Takeaway

 

PTL held its analyst briefing yesterday to update investors and analysts on their FY23 results and future outlook. Notably, the company reported a PAT of PkR425mn (PkR2.58/sh) in FY23 compared to PkR602bn (PkR2.72/sh) in SPLY, reflecting a decline of 5.1% YoY, primarily attributed to higher financial charges.

 

• Company has expanded its export destinations and achieved exports of ~US$12mn in FY23. Management aims to double exports in the next 2-3 years, targeting US$25-30mn, while maintaining a primary focus on the local market.
• In the recent expansion, the company has primarily focused on the backend process, allocating ~80-85% of the CAPEX to this aspect. The back-end expansion is secured for the next 4-5 years, while the front-end is kept open for potential future opportunities.
• PTL is considering investment in the front-end in accordance with the available opportunities. Additionally, in the recent expansion, the company has increased its grid capacity to 11.5MW, ensuring the power requirements are secured for the next 3 years.
• Regarding tyre set capacity, although the capacity has increased by 21%, the expansion primarily focuses on large tyres that have substantial value contribution. Full utilization of the current capacity alone can push the topline beyond PkR40bn, according to management.
• Despite the recent expansion, the company has a loan of only PkR8.3bn, of which ~24.5% is a subsidized loan. The company's BOD has set a target that finance costs should not exceed 4.5% of the total sales.
• On the segment front, bike tyres make up ~45-50% of sales, with farm tyres (for tractors) being the second-largest contributor. Meanwhile, their sales mix consists of 15%/15%/5%/65% for local OEMs/exports/institutions/replacement market, respectively.
• As per PTL management, all types of tyre imports have been banned through Afghan transit trade, and the government is effectively working to curb under-invoiced imports as well. This would benefit the local tyre industry; however, the impact would be witnessed in the next calendar year as the import supply line is of 6-9 months.
• Management expects this year to be a bumper year in terms of volumetric growth for all tyre companies in Pakistan. For PTL, management is confident in posting 25% annual growth in revenue in every quarter going forward, with margins expected to stay above 16%.
• As per the management presentation, the total size of the Pakistan tyre market is US$1.0bn, with 40% met through local manufacturing and 60% through imports (30% legal imports, 30% smuggled/under invoiced).