Earnings Report /
Pakistan

Millat Tractors: Q2 FY 20 review – In-line results; payout invites confidence

    Intermarket Securities
    19 February 2020

    Millat Tractors (MTL) reported 2QFY20 NPAT of PKR452mn (EPS: PKR9.08), up 27%qoq but lower by 36% yoy. This takes 1HFY20 NPAT to PKR808mn (EPS: PKR16.22), down 56%yoy. The result is in line with expectations. MTL announced a first interim dividend of PKR20/sh, much higher than our expected dividend of PKR15/sh.

    Key highlights 

    • Revenue witnessed an 18%yoy decline to PKR4,800mn (sequentially flat), led by 28%yoy drop in volumes to 4,399 units compared to 6,096 units in 2QFY19 and 4,829 units in 1QFY20. 
    • Gross margins rose 67bps qoq to 16.99% (16.32% in 1Q), despite sequentially flat sales (and a 9%qoq decline in unit sales) indicating strong cost control due to high localization footprint and possibly higher export margins.
    • Distribution expenses increased 4%yoy (17%qoq decline) while admin expenses remained flat vs. the same period last year. Other income declined 70%yoy (while rising 517%qoq) due to lower cash balances.
    • Finance costs, albeit coming from a low base, rose 4.4xyoy to PKR101mn. We attribute this to liquidity stuck in government refunds, forcing the company to raise short term debt.