Indus Motor Company has reported a 40% increase in profit that reached Rs1.85 billion in the quarter ended September 30, 2020.
According to a notice sent to the Pakistan Stock Exchange (PSX) on Wednesday, the company had registered a profit of Rs1.32 billion in the corresponding quarter of previous year.
Accordingly, earnings per share (EPS) of the company came in at Rs23.48 in Jul-Sept 2020 compared to Rs16.78 in the same quarter of last year.
Along with the result, the company announced a cash dividend of Rs12 per share for the Jul-Sept quarter.
“Growth in earnings came on the back of 75% year-on-year jump in volumes,” said JS Global analyst Ahmed Lakhani.
During the Jul-Sept 2020 quarter, net sales of the company amounted to Rs34.2 billion, up 65% compared to Rs20.7 billion in the same quarter of 2019.
Moreover, a 44% year-on-year reduction in distribution cost and 57% year-on-year increase in other income also played a role in the company’s profit, Lakhani pointed out.
Other income of the firm soared to Rs1.09 billion during the period under review compared to Rs694.8 million in the same quarter of last year, a surge of 56.67%. Finance cost rose 75% to Rs34.09 million against Rs19.47 million last year.
According to Taurus Securities’ analyst Nabeel Dochki, the lower-than-expected profit came on the back of reduced gross margins, which could be attributed to lower margins on the newly launched Toyota Yaris, which accounted for 5% of total sales.
Gross profit did not increase in line with revenue, depicting contraction in margins on Yaris, which was previously indicated by the management, the analyst said.
According to a report of Topline Securities, the company’s revenue increased mainly due to a 74% year-on-year rise in unit sales.
Demand for new cars rebounded strongly as lockdown was lifted following decline in Covid-19 cases and sharp reduction in interest rate, the report said, adding that although the quarter-on-quarter margins improved significantly, they still came in lower-than-market expectations.
Effective taxation for the Jul-Sept 2020 quarter stood at 30% compared to 26% for the same period of last year.
Indus Motor’s share price dropped Rs39.21, or 3.15%, to close at Rs1,206.95 with a volume of 77,300 shares in a bearish session at the PSX.
Published in The Express Tribune, October 29th, 2020.
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