Agriauto Industries Results Review

Company Overview

Agriauto Industries Limited (the Company) was incorporated in Pakistan on June 25, 1981 as a public limited company and is listed on Pakistan Stock Exchange Limited. The Company is engaged in the manufacture and sale of components for automotive vehicles, motor cycles and agricultural tractors.

One noticeable feature of company’s financial statements is that it has no long term or short term loans except for some lease liability. With no change in paid up capital for more than 6 years, it can be safely said that any capital expenditure is financed through retained earnings and operating cash flows.

From a review of directors’ reports for FY 2020 and 2019, it appears that the company suffered a downturn in performance in these two years due to slowdown of general economy instead of any operational issue. In 2019, economy suffered from slow growth rate and cost of inputs in automobile sector went up due to devaluation of Pakistan Rupee whereas in 2020, COVID-19 outbreak had adverse affects on economies globally and Pakistan was no exception.

Historical Results Review

The company seems to be in good financial health. There are almost no loans to speak of except for lease liability of around 8.7 million rupees that makes up around 1.12 percent of total liabilities. Average operational cash flows in excess of 200 million rupees for last 5 years and EPS of 15.03 in 2020 even after incurring a loss are indicators of financial and operational strength.

As it can be seen from the chart, even with a fall in Gross Profit margin in 2019, company’s sales had gone up. GP margin fell in 2019 due to increase in cost of inputs due to rupee devaluation as previously mentioned. However, Net Profit margin was maintained. In 2020, NP margin became negative due to loss incurred as a result of fall in sales in COVID-19 economy. Other Income primarily in form of Dividend from subsidiary company to the amount of around Rs. 144 million played a part in 2020 in compensating for operating loss of Rs. 127 million. Same dividend was also received in 2019 when company suffered from increased cost of input.

Current Ratio has been more or less constant with current assets at more than 5 times the level of current liabilities except in FY 2020 where it fell at 3.30. This fall was primarily due to increase in trade payables.

Company has been increasing its fixed assets quite regularly. With almost no loan financing and no increase in paid up capital, this capital expenditure has no doubt been supported by a positive operating cash flow and retained earnings. Operating cash flow became negative in 2019 primarily due to increase in receivables against LC margins. These receivables stabilized in 2020 bringing operating cash flow back in green.

Latest Results Review

Company seems to be doing well and coming back into stride with recovering economy. Sales increased by 53% in 1H 2021 on YOY basis while GP margin increased by 61% indicating improved cost control. This effective cost control also carried on to increasing NP margin by 123%.