Earnings Report /
Pakistan

Millat Tractors: Q3 FY 20 review: Sequentially better results

  • Millat Tractors (MTL) reported Q3 FY 20 NPAT of PKR553mn (EPS: PKR11.09), up 22% qoq but lower by 48% yoy

  • Gross margins rose 145bps qoq to 18.5% (17.0% in Q2), in line with our expectations

  • Reiterate Neutral with a target price of PKR752

Intermarket Securities
27 April 2020

Millat Tractors (MTL) reported 3QFY20 NPAT of PKR553mn (EPS: PKR11.09), up 22% qoq but lower by 48% yoy. This takes 9MFY20 NPAT to PKR1,361mn (EPS: PKR27.31), down 56% yoy. This is better than our expected NPAT of PKR1,205mn (EPS: 24.18) for 9MFY20, and NPAT of PKR397mn (EPS: PKR7.96) for the quarter. 

Key highlights:

  • Revenue witnessed an 18% yoy decline to PKR5,942mn (inline with our expectations) led by a 28% yoy drop in volumes to 5,383 units compared to 7,440 units in 3QFY19. Sequentially however, there is a 24%qoq increase in revenue, broadly the same as the sequential volumetric uptick. 
  • Gross margins rose 145bps qoq to 18.5% (17.0% in 2Q), in-line with our expectations. This may be due to an increase in tractor prices announced by MTL, according to channel checks.
  • Distribution expenses increased 16% yoy and by a sharp 48% qoq, while admin expenses remained flat vs. the same period last year. The former could be because of increasing exports. Other income declined 52% yoy to PKR80mn (compared to PKR167mn) and 44% qoq due to lower cash balances, in our view.
  • Finance costs, albeit coming from a low base, rose 4.7xyoy to PKR77mn, while down 24%qoq. We attribute this to liquidity stuck in government refunds, forcing the company to raise short term debt. Effective tax rate clocked in at 27% compared to 29% last quarter. This may be due to an increase in export sales, in our view.