Pak Suzuki posts massive profits despite overpriced cars

Despite an unreasonably high price jump, Pak Suzuki Motor Company Limited (PSMC) has reported a significant increase in profit in the 1st quarter of 2021.

The company recently announced its financial results for the 1st quarter, i.e. till March 31st, 2021, in which Pakistan's largest automobile industry player reported a profit of Rs. 777.85 million.

The car manufacturing firm had booked a loss of Rs. 941.14 million in the same period, last year, according to a notice sent to Pakistan Stock Exchange (PSX). This turnaround was due to the increase in sales and better gross margins.

PSMC’s revenue increased by 103% grossing at Rs. 36.09 billion as compared to Rs. 17.74 billion recorded in the same period last year. Revenues were also increased by 36% quarter on quarter basis.

This was due to higher volumetric sales, roundabout 106% year on year, in 1QCY21 compelling to increase in price compared to the same period last year. Another factor behind this abnormal increase is the low base effect due to COVID-19 in March 2020. Additionally, improved macroeconomics has also contributed to the automaker's profits.

The gross margins have relatively improved because of high fixed cost coverage due to higher volumes. Gross margins improved by 2.9ppt year on year in 1QCY21.

With the number of bookings increasing, the PSMC saw an increase of 855.90% or 8.5x to Rs. 619.29 million as compared to Rs. 64.79 million which was due to higher incomes on advances from customers.

Finance cost was reduced by 76.42% to Rs. 250 million as compared to Rs. 1.06 billion recorded in the same period last year.

Earnings per share were reported at Rs. 9.45 as compared loss per share of Rs. 11.44. In March alone, the company had a significant lead on its entire competition having sold 10,161 vehicles in March of 2021, recording a Month-on-Month (MoM) sales increase of 14.1 percent and a YoY sales increase of an enormous 280.1 percent.