INDU announced 1QFY16 earnings of PkR2.93bn (EPS: PkR37.33), up by a massive 160%YoY from NPAT of PkR1.13bn (EPS: PkR14.34) in 1QFY15, profits clocking in above our estimated NPAT of PkR2.74bn (EPS: PkR34.93).
Results were accompanied with interim cash dividend of PkR20/share, inline with our estimates.
Increase in earnings was primarily on the back of (i) 44%YoY topline growth to PkR28.9bn with unit sales up 67%YoY, (ii) GM expansion by a massive 7ppt YoY to 16.9% on weaker int’l steel prices coupled with favorable currency dynamics and (iii) 47%YoY reduction in distribution expenses. On a sequential basis, profits were up 9%QoQ (pre-tax basis: -9%QoQ) where seasonal dip in unit sales was compensated by a 50bps uptick in GMs.
INDU has gained 31%CYTD to trade at a FY16F P/E of 10.4x. In this regard, while outlook for volumes is strong and valuations remain un-stretched given cyclicals are justifiably trading at a premium in the current macro environment, we flag risks emanating from (i) any reversal in GMs trend, (ii) limited spare capacity and (iii) potential competition from HCAR when it launches the next generation Civic. While the stock has hit its upper circuit in the aftermath of result announcement, we retain a selective preference for PSMC and HCAR.
INDU Result Review
|WPP & WWF||315||123||157%||N.M.|
|Source: Company Accounts|
By: InterMarket Securities Limited