INDUS MOTOR COMPANY LTD.
Research Analyst, PAGE
Jan 25 - 31, 2010
Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC), and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing, and marketing of Toyota vehicles in Pakistan since July 01, 1990.
IMC is sole distributor of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. The shares of the company are listed on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25% stake in the company equity. The majority shareholder is the House of Habib.
IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motor Company's plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are manufactured.
Heavy investment was made to build its production facilities based on state of art technologies. IMC's product line includes six variants of the Toyota Corolla, Toyota Hilux Single Cabin 4x2, and 4 versions of Daihatsu Cuore. The company also has wide ranges of imported vehicles.
COMPANY'S OPERATING PERFORMANCE
The combined sales of Toyota and Daihatsu brands for the quarter recorded a jump of 99% to 10,631 units compared to 5,335 units sold for the same period last year. Correspondingly, the production of PC and LCV for the quarter ended September 30, 2009 also increased by 83% to 10,576 units as against 5,785 units produced in the same period in 2008. The mismatch of volumes between the two comparative quarters is due to the run out phase of the previous Corolla model.
FINANCIAL PERFORMANCE (RS IN 000)
QUARTER ENDED SEPTEMBER
2009 2008 Sales 11,936,124 5,159,871 Cost of sales 10,922,558 4,984,124 Gross profit 1,013,566 175,747 Distribution costs 89,115 132,566 Admin expenses 78,665 81,223 Profit before tax 1,167,101 57,247 Profit after taxation 759,165 48,125 Loss in EPS (Rs) 9.66 0.61
On the financial side, increase in the company's revenue and profit after tax for the quarter ended September 30, 2009 from Rs 5.2 billion to Rs 10.9 billion and Rs 48 million to Rs 759 million respectively is mainly due to the rise in sales volume.
Prices of all Corolla cars have been increased by Rs 30,000. The price of Toyota Corolla XLi was raised to Rs1,269,000 compared to previous price Rs 1,239,000. Toyota Corolla GLi's new price would be Rs 1,384,000 while Toyota Altis would cost Rs 1,669,000 against previous Rs 1,639,000. Toyota Altis S/R would be sold at Rs 1,754,000 and Toyota Altis A/T Rs 1,839,000 compared to the previous Rs 1,809,000.
AUTOMOBILE SECTOR IN PAKISTAN
Automobile sector is one of the fastest growing sectors in Pakistan. It contributes towards the nation's economy in the form of technology transfer, employment, investment and much more. Automobile sector contributed over Rs.23 billion to the national exchequer in the year 2003-04.
As the industry is growing, so are the automobile companies.
Every manufacturer is in the process of increasing production capacity to meet customer demands. Throughout the 90's the annual automobile production remained constant around 45,000 units but due to consistent policies and positive macroeconomic conditions the automobile industry boomed by 120,000 units/annum in just 4 years.
The first quarter 2009-10 operating environment was a testing time for the local auto industry. Though the sales of locally assembled Passenger Cars (PC) and Light Commercial Vehicles (LCV) were up 13% to 30,787 units as compared to 27,159 units sold for the same period last year, the overall market remained sluggish.
The segment of 850-1000cc cars actually declined for the quarter while the major share in volume increase of 1300cc and above cars is mainly attributable to sales of Toyota Corolla which were absent for the same period last year owing to the run out of the previous model. Some improvement in the economic situation on the back of IMF support, healthy farm income and the government's decision to remove 5% Federal Excise Duty on cars above 850cc, allowed for a reduction in car prices contributed significantly in preventing further decline.
Auto industry being a key driver of economic growth, technology transfer and job creation requires government support to reenergize itself. However, to improve industry performance the government should revise the downward withholding tax slabs at registration stage, restrict used car imports, review unrealistic localization requirement, revisit the Auto Industry Development Program (AIDP), and initiate a dialogue with all stakeholders for renewed implementation of AIDP.
The New Year 2010 is challenging for the auto industry. Economic recovery, political stability, and security situation will play an important role in sales performance during the year. However, it is expected that the auto sales for 2009-10 will improve as compared to the previous year. Continuous depreciation of the Pak Rupee against major currencies will exert pressure on margins. No doubt, the company is producing high quality vehicles for the complete satisfaction of customers, and to manage cost increases.