Pushed by strong demand and enviable margins arising from economies of scale, 2QCY06 earnings of the Pak Suzuki Motor Company Ltd remained overwhelmingly positive, as the company experienced bottom-line growth of approximately 168 percent.
The key to this strong performance was other operating income, which jumped 145 percent to contribute a quarter to total earnings. Growing levels of other operating income indicate larger and larger bank balances, which earn mark-up income, especially in a scenario of rising interest rates.
Since these balances arise from Suzuki bookings, more booking mean that demand remains strong despite an increasingly competitive market, says a report issued by the BMA Capital.
The Suzuki Liana sold 3,956 units in the last quarter of FY06 (since the February launch of its locally assembled model). This may be compared to 4,979 units of the Honda City and Civic put together that were sold during the same period. On a similar note the Suzuki Mehran sold 9,895 units compared to 2,332 units of its closest competitor - the Daihatsu Cuore.
Juvaria Jafri, an analyst at the BMA Capital, said there were other reasons to be positive about the Pak Suzuki Motor Co, as the company had recently completed capacity enhancement and was currently the largest auto assembler in Pakistan with a capacity of 120,000 units.
This is significant in an industry that tends to benefit from economies of scale. At the same time, the Company is also associated with the highest level of indigenisation (among original equipment manufacturers).
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