Atlas Battery Limited (PSX: ATBA) was incorporated in Pakistan as a public limited company in 1966. The company manufactures and sells automotive, motorcycle batteries and energy storage batteries and allied products. Shirazi Investments (Private) Limited is the holding company of ATBA. The company has signed a technical collaboration with Japan Storage Battery Co. Limited for the production and sale of Japanese batteries in Pakistan. ATBA also boasts itself to be the first battery manufacturer to launch branded distilled water and hybrid battery.
Pattern of Shareholding
As of June 30, 2022, the company has 28.013 million shares outstanding which are held by 2629 shareholders. Associated companies, undertakings and related parties form the largest shareholder category holding 77.44 percent of ATBA’s shares. This is followed by local general public having a stake of 18.35 percent in the company. Joint stock companies account for 2.24 percent of ATBA’s shares. Public sector companies and corporations own 1.38 percent shares. The remaining shares are held by other categories of shareholders including Modarba and Mutual Funds, Insurance companies, Banks, DFIs and NBFIs etc.
Historical Performance (2018-22)
ATBA’s topline took a dip in 2019 and 2020 but rebounded in the subsequent years. The bottomline also stayed in the negative zone in 2019 and 2020. A sneak into the financial statements reveal that 2019 was a more difficult year for ATBA than 2020 when there was a global economic slowdown due to global pandemic. The bottomline showed an uglier picture with tighter margins and operating losses in 2019 versus operating profit in 2020. The reason for the desolate performance in 2019 was a slowdown in automobile industry due to high cost of production, devaluation of Pak Rupee and higher interest rate during the year. Sale of locally manufactured cars, tractors, trucks and buses as well as motorcycles and three-wheelers, all registered a decline in 2019, the shocks of which were felt in the sale of automotive parts and accessories including batteries. Another reason for the sluggish demand of batteries in 2019 was the increased power generation which reduced the load shedding and the demand of medium and heavy batteries used in UPS. The result was a 30 percent year-on-year drop in the topline with GP margin standing at 2.1 percent in 2019 versus 11 percent in 2018. During the year, gain on the disposal of operating fixed assets resulted in a massive rise of over 4 times in other income, however, couldn’t prevent the company from making operating losses worth Rs.211.57 million. Finance cost also magnified owing to enhanced running finance utilization along with rising interest rate. The bottomline posted a net loss of Rs.592.46 million with net loss margin of 4.6 percent in 2019 vis-à-vis NP margin of 3.2 percent in 2018.
In 2020, the topline further shrank by 2 percent year-on-year. This was due to subdued growth in the automobile industry on account of COVID-19. Moreover, lockdown of industry and businesses had created excess unutilized power capacity which reduced the demand of UPS batteries. The company worked on the cost-cutting measures which resulted in a rise in gross profit by over 2 times with GP margin standing at 7 percent. The operating expenses were also kept in check during the year. This resulted in ATBA making operating profit worth Rs. 204.5 million in 2020 with OP margin of 1.6 percent. The high finance cost due to increased working capital didn’t let operating profit to translate into a positive bottomline. However, the magnitude of net losses was lower when compared to the level of 2019.
2021 was characterized by a stable macroeconomic environment due to dilution of the effects of COVID-19. The automobile industry also rebounded owing to low interest rate which augmented the purchasing power of customers; consequently, the demand of automobile recoiled, producing demand for automotive battery. As the businesses and industries started operating in full swing after the lockdown period, there was a widespread power deficiency, resulting in the improved demand of UPS batteries. Moreover, a significant boost in the sales of solar panels in the off-grid areas further buttressed the demand of medium and small batteries. Improved sales volume and prices coupled with cost control measures resulted in the GP margin of 11.4 percent – the highest mark since 2018. Operating expenses as a proportion of sales remained intact. Finance cost which had been on the rise since 2018 gave some respite in 2021 owing to low discount rate. NP margin of 4.5 percent achieved by ATBA in 2021 was the highest since 2018.
2022 was another encouraging year in a row where topline took a 25 percent year-on-year flight on the back of improved volumes, sales mix and prices. However, increase in the cost of production mainly due to declining value of Pak Rupee didn’t allow ATBA to translate the effect of healthy topline into an encouraging GP margin which eventually dipped to 10.9 percent. High finance cost and dipping other income also took its toll on the bottomline which dropped by 23 percent year-on-year in 2019.
Recent Performance (1HFY23)
ATBA posted tremendous performance in 1HFY23. With load shedding and power outrages rampant in both rural and urban areas, the demand of batteries grew manifold which to a great extent nullified the lower demand from automobile industry. The topline of ATBA grew by 66 percent year-on-year mainly due to encouraging demand in the replacement market coupled with better prices. GP margin grew to 13.4 percent in 1HFY23 versus 10.3 percent during the same period last year. Operating expenses grew in line with inflation while other expense growth might be the result of high WWF and WPPF during the year. Other income continued to strengthen the bottomline. OP margin stood at 8.5 percent in 1HFY23 versus 4.7 percent in the same period last year. Finance cost kept growing owing to high discount rate, yet couldn’t harm the bottomline which grew by over 2 times with NP margin of 4.8 percent in 1HFY23 versus 2.1 percent in 1HFY22.
Future Prospects
As automobile industry is suffering from crippling growth owing to massive decline in the purchasing power of customers, high interest rate and restriction on the import of CKD units, this will produce ripple effect on the demand of automotive batteries; however, rampant power outrage will continue to keep the demand of UPS batteries upbeat. Moreover, the growing trend of solar panel installation will also bode well for the demand of small and medium sized batteries. Hence it is a no-brainer that the demand of ATBA products is expected to remain buoyant in the coming times. Furthermore, coming months will further add to the volumes owing to seasonality factor as load shedding is the highest during summers and so is the demand of batteries.
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