Earnings Report /

Pakistan Suzuki: 2QCY22 review – Results beat our expectations on better margin and other income

  • PSMC posted a 2QCY22 EPS of PKR5.38, beating our expectation due to higher gross margin and other income

  • Gross margin declined by c.1.5ppt YoY, owing to elevated input costs, PKR depreciation and lagged of price hike impact

  • Sales are likely to contract in the coming quarters amid plant closure and administrative measures, in our view

Intermarket Securities
25 August 2022

Pak Suzuki Motor Co. (PSMC) has posted a NPAT of c.PKR0.4bn (EPS: PKR5.38), up c.5% YoY and from a LPS of PKR5.59 last quarter. This takes 1HCY22 net loss to PKR17mn (LPS: PKR0.21). The 2Q result significantly beats our projected LPS of PKR7.12, owed to higher-than-expected gross margin and significant other income.    

Key result highlights:

  • Net revenue reached an all-time high of c.PKR65bn (broadly in line with expectations), owing to record volumetric sales of 40,860 units. The surge in sales is largely attributed to large order backlog (healthy demand), as delivery lead times averaged 4mths for the company.

  • Gross margin has declined by c.1.5ppt YoY to 4.4%, largely due to the sharp rise in input costs, PKR slippage and lagged price hikes. GM clocked in higher than our estimate of 3.3%, owed to greater JPY exposure, in our view.   

  • Finance cost rose to PKR0.8bn (from a negligible level in SPLY), largely attributed to compensations on late payments. The surge in other income is owed to significant cash balances near PKR30bn, in our view.  

  • Among other line items, Distribution expenses surged to PKR0.9bn on account of launch of new Swift and high volumes. Taxation clocked in at c.PKR1.0bn, lower than our estimate of PKR1.2bn. We await for further clarity on the latter.

This is a decent result from PSMC, which has found its way back into profits, on account of increase in margins and cash balances. Going forward, the price increases (lagged) are likely to cushion margins under elevated cost pressures. But, plant closure (delays in delivery) and PKR volatility will keep margins under pressure, in our view.