Now that the latest model of the Toyota Corolla has been available for more than a year, many analysts expect a gradual stabilization in units' sales by Indus Motor Company (PSX: INDU). However, the company reported no such signs in its result announcement for 1HFY16.
The top line trotted higher by 31 percent when compared to 1HFY15. Note that its performance in this earlier period was already stellar as the company "made almost as much money in the first six months of FY15 than it made in all of FY14", as reported in an earlier column by BR Research.
Relatively low prices of key inputs such as steel and favourable foreign exchange trends helped cap the cost of production, so that gross margin has improved from 12% to 16% year-on-year, in the period under review.
Also noteworthy is the company's successful efforts in keeping a lid on distribution expenses even with higher unit sales. As a percentage of the top line, distribution expenses shrank to 0.7 percent in 1HFY16, compared to 1.12% in 1HFY15.
Expectation of flatter sales of its flagship model is not the only concern among analysts. AKD analyst Ali Poonawala also highlights recent appreciation of Japanese Yen and bottoming out of steel prices. However, even with these speed bumps ahead, INDU's growth story is expected to simply simmer down a bit, not change course.
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