Loads Limited (PSX: LOADS) was incorporated in Pakistan as a private limited company in 1979 and was later converted into a public limited company in 1994. The company manufactures and sells radiators, exhaust systems, sheet metal components, and other parts for the automobile industry.
Pattern of Shareholding
As of June 30, 2024, LOADS has a total of 251.250 million shares outstanding which are held by 8182 shareholders. Directors, their spouses, minor children, and sponsors have the majority stake of around 41.47 percent in the company followed by the local general public holding 35.67 percent shares. Associated companies, undertakings, and related parties account for 12.5 percent of the outstanding shares of LOADS. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
The top line of LOADS slid thrice during the period under consideration i.e. in 2020, 2023, and 2024. Its bottom line dropped until 2020 to record net loss during the year. In 2021, LOADS’s bottom line recovered from net loss and registered growth in 2022. LOADS posted net loss yet again in 2023 followed by net profit in 2024. The gross and net margins of the company hit their lowest level in 2020 and maxed out in 2024. Conversely, its net margin touched its lowest level in 2023 and peaked in 2024. The detailed performance review of the period under consideration is given below.
In 2019, the topline recorded year-on-year growth of 16.77 percent. This came on the back of an upward price revision to justify the depreciation of the Pak Rupee. Moreover, the topline growth was also the result of the addition of converters in Suzuki products and hefty growth in Toyota Corolla sales. The gross profit also jumped up by 39 percent year-on-year with a GP margin of 9.1 percent in 2019 versus a GP margin of 7.6 percent recorded in 2018. Operating expenses rose by 5.43 percent year-on-year. Other expenses also gave a breather and plunged by 22.67 percent year-on-year in 2019 due to the high-base effect as the company recorded a loss on the sale of investment in Pakistan Investment Bonds in 2018. Other income almost remained intact in 2019. Operating profit boasted a stunning year-on-year growth of 60.47 percent in 2019 with OP margin clocking in at 6.7 percent versus OP margin of 4.8 percent posted in 2018. Finance costs mounted by 124.43 percent year-on-year in 2019 on account of an increase in discount rate coupled with an increase in short-term financing facilities availed during the year. This coupled with a minimum tax on turnover culminated into a bottom line plunge of 48.7 percent year-on-year to clock in at Rs.41.22 million in 2019 with EPS of Rs.0.27 versus EPS of Rs.0.53 recorded in the previous year. NP margin also narrowed down to 0.7 percent in 2019 versus the NP margin of 1.6 percent recorded in 2018.
In 2020, COVID-19 struck and automobile sales crashed by 53 percent year-on-year due to the slowdown of the economy. This produced a direct impact on the sales of LOADS which tapered off by 51.34 percent year-on-year in 2020. Low off-take across the categories also produced a downward effect on the cost of sales. Gross profit thinned down by 61.85 percent year-on-year in 2020 with GP margin clocking in at 7.1 percent. Low outward freight, vehicle running and traveling costs, advertising and sales promotion as well as employee benefits squeezed the operating expenses by 4.4 percent year-on-year in 2020. Other expenses posted a drastic 87.57 percent year-on-year drop as the company didn’t make any provisions for WWF and WPPF during the year. Other income multiplied by 126.67 percent during the year as the company made markup income on loans to its subsidiaries. Despite cost curtailment and a check on operating expenses, operating profit shrank by 56.47 percent year-on-year in 2020 with an OP margin of 6 percent. To top it off, finance costs grew by 45.7 percent year-on-year in 2020 due to a discount rate hike in the first three quarters of 2020 coupled with long-term loan facilities availed by the company from commercial banks and ORIX leasing Pakistan Limited to manage its cash flow and working capital requirements. LOADS also availed SBP refinance scheme in 2020 for the payment of wages and salaries. This put a further dent in the bottom line which posted a net loss of Rs.137.33 million in 2020. Loss per share clocked in at Rs.0.91 in 2020.
In 2021, the signs of COVID-19 began to melt away with a significant reduction in discount rate which spurred auto financing. The automobile sector registered a boom of 62 percent year-on-year in 2021. This resulted in a growth of 69.77 percent year-on-year in the topline of LOADS. Pak Rupee depreciation took its toll on the cost of raw materials consumed during the year. Moreover, toll manufacturing, utility charges, salaries and wages, etc also soared which drove the cost of sales up by 67.40 percent year-on-year in 2021. Gross profit grew by 100.62 percent in 2021 which resulted in GP margin ticking up to 8.4 percent. A rise in the advertisement and promotion budget as well as outward freight raised the operating expense by 4 percent year-on-year. The impairment loss on trade receivables booked by LOADS in 2020 was reversed in 2021 due to the recovery of outstanding receivables as the economy began to show signs of recovery. Other expenses recorded a hefty rise of 297.34 percent in 2021 on the back of higher provisioning done for WWF and WPPF. Other income also recorded a rise of 15.49 percent in 2021 on the back of exchange gain, gain on disposal of fixed assets, and reversal of provisions against inventory. Operating profit posted a staggering year-on-year rise of 140.45 percent in 2021 with OP margin clocking in at 8.4 percent – almost the same as GP margin. Finance cost also contracted by 37.94 percent year-on-year in 2021 due to a downward revision in discount rate coupled with a drop in the outstanding loan portfolio of LOADS. The bottom line recorded a net profit of Rs.123.88 million in 2021 with EPS of Rs.0.63 in 2021. NP margin stood at 2.6 percent in 2021.
In 2022, the boom of the automobile industry continued whereby it registered a volumetric growth of 53 percent over the previous year. This also provided impetus to LOADS which posted a topline growth of 65.18 percent year-on-year in 2022. Soaring inflation as well as Pak Rupee depreciation pumped up the cost of sales by 61.6 percent in 2022. Moreover, high toll manufacturing charges, salaries, and wages as well as other employee benefits also played their part in escalating the cost of sales. However, upward price revisions and handsome volumes drove the gross profit up by 104.11 percent in 2022 with GP margin clocking in at 10.4 percent. While operating expenses posted a drastic growth of 40.82 percent in 2022, it was counterbalanced by a stunning growth in other income on account of markup earned on loans to subsidiaries. Operating profit boasted a growth of 114.15 percent in 2022 with an OP margin of 10.9 percent, even higher than the GP margin. Finance costs mounted by 70.51 percent on the back of a high discount rate coupled with increased borrowings during the year. Bottomline grew by 115.67 percent in 2022 to clock in at Rs.267.17 million in 2022 with EPS of Rs.1.06. NP margin stood at 3.4 percent in 2022.
In 2023, LOADs’s topline shrank by 42.33 percent. This was the result of a slowdown in the auto industry on the back of high financing rates, low purchasing power of consumers, and import restrictions imposed by the Central Bank. Cost of sales slid by 46.13 percent in 2023, resulting in a 9.62 percent plunge in gross profit in absolute terms. However, the GP margin greatly improved during the year to clock in at 16.3 percent. Operating expenses remained intact at last year’s level owing to cost control measures put in place by the company. One such measure was the downsizing of its workforce from 733 employees in 2022 to 382 employees in 2023 which greatly curtailed the payroll expense. No profit-related provisioning done during the year resulted in an 82.94 percent decline in other expenses in 2023. Other income strengthened by 68.42 percent in 2023 due to higher mark-up income earned on loans to subsidiaries and greater gain recorded on the disposal of property, plant, and equipment during the year. The major downbeat factor that resulted in operating loss in 2023 was the booking of impairment of equity investment and mark-up recoverable from its associated company, Hi-Tech Alloy Wheels Limited (HAWL) to the tune of Rs.859 million and Rs.1345 million respectively. This was due to a delay in the commissioning of its operations due to the downturn of the auto industry. As a consequence, LOADS posted an operating loss of Rs.1173.85 million in 2023. Finance costs also surged by 56.91 percent in 2023 due to the high discount rate. Net loss clocked in at Rs.1255.67 million in 2023 with a loss per share of Rs.5.
In 2024, LOADS’s topline remained intact at last year’s level of Rs.4.49 billion. The slump in auto industry sales continued to take its toll on the volumes of LOADS in 2024. On a positive note, the appreciation in the value of local currency reduced the cost of sales by 3.96 percent in 2024, resulting in a 19.87 percent improvement in gross profit in absolute terms. GP margin also attained its highest level of 19.6 percent in 2024. The company kept a check on its operating expense which dipped by 1.2 percent in 2024. ECL against the loan to the subsidiary company; HAWL also increased by 12.98 percent in 2024—other expenses mounted by 456.82 percent in 2024 due to higher provisioning booked for WWF and WPPF. However, operating expenses and other expenses were offset by a staggering 221.69 percent rise in other income recorded during the year. This was primarily the result of a gain in the disposal of the Korangi land and building coupled with mark-up income recorded on loans to subsidiaries. LOADS posted an operating profit of Rs.884.28 million in 2024 with an OP margin of 19.7 percent. Finance cost ticked up by 4.89 percent in 2024. The outstanding liabilities of LOADS greatly reduced during the year resulting in a gearing ratio of 29 percent in 2024 versus a gearing ratio of 44 percent recorded in the previous year. The company posted a net profit of Rs.826.59 million in 2024 with EPS of Rs.3.29 and an NP margin of 18.4 percent.
Recent Performance (1QFY25)
LOADS thrived in the 1QFY25 as evidenced by 44.47 percent year-on-year growth in its topline during the quarter. The rebound in the automobile sector resulted in improved demand from OEMs. This was on the back of consistent improvement in the exchange rate and a decline in the policy rate. Cost of sales grew by 32.67 percent during the quarter resulting in 96.38 percent year-on-year growth in gross profit with GP margin clocking in at 25.17 percent in 1QFY25 versus GP margin of 18.51 percent recorded during the same period last year. Operating expenses mounted by 20.16 percent during 1QFY25. The company started inducting employees in 2024 in anticipation of improved demand and higher capacity utilization. Assuming the same continued during 1QFY25, higher payroll expense appears to be the main driver of elevated operating expense in 1QFY25. ECL against markup receivable from HAWL ticked up by 10.5 percent in 1QFY25. Other expenses clocked in at Rs.10.19 million during 1QFY25 owing to profit-related provisioning. The company incurred no other expenses during the same period last year. Other income ticked up by 0.61 percent during 1QFY25 due to higher mark-up income received from subsidiaries. Operating profit burgeoned by 80.53 percent in 1QFY25 with OP margin clocking in at 21.51 percent versus OP margin of 17.21 percent recorded in 1QFY24. Finance cost slipped by 42.16 percent in 1QFY25 due to a discount rate cut. LOADS recorded a net profit of Rs.79.52 million in 1QFY25 versus a net loss of Rs.8.51 million recorded in 1QFY24. EPS clocked in at Rs.0.32 in 1QFY25 versus a loss per share of Rs.0.03 posted in 1QFY24. NP margin was recorded at 6.48 percent in 1QFY25.
Future Outlook
Anticipated improvement in auto industry volumes on the back of sound policy management will augur well for LOADS’s volumes. The stability of the Pak Rupee, declining interest rate, bilateral and multilateral flows as well a downtick in inflation have provided considerable support to the local industry. While high vehicle prices may discourage potential buyers owing to sustained shrinkage in their purchasing power, ADR taxation will push the banks to offer favorable financing rates.
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