EUR 4.27 For Business Accounts Only

Pak Suzuki Motor Co. (PSMC): 2Q2019 LPS of Rs6.62 vs. EPS of 4.78 in 2Q2018 (In-Line with Expectations)

• Pak Suzuki Motors (PSMC) posted LPS of 6.62 vs. EPS of Rs 4.78 in same period last year. Significant decline in earnings was mainly due to massive reduction in gross profit margins by 5ppts .
• During outgoing quarter revenue of the company witnessed a mere 1% YoY growth to Rs31bn despite multiples hikes in prices owing to declining volumetric sales in said period.
• Gross profit margin were down by 5ppts, due to significant PKR depreciation against USD by 14% in 2QCY19 coupled with inflationary environment leading to high input costs.
• Distribution cost has increased by 56% YoY due to higher transportation costs (from factory to dealer) which is currently borne by the company.
• The company has booked a tax reversal (higher tax recorded in previous accounts) owing to change in turnover expectations.
• Other Income has witnessed decline of 76% YoY mainly due to low income from bank deposits as the company has reduced cash balance in its accounts after decline in advance payments from customers.
• Finance cost has increased by 1.8x YoY due to addition of short term borrowings in the outgoing quarter.
• Key risks to company includes 1) Further PKR depreciation 2) slowdown in economy and 3) Entry of new auto players resulting in stiff competition.