Hinopak Motors Limited

INTRODUCTION: Hinopak Motors Limited was established in 1986 with the collaboration of Hino Motors Japan, Toyota Tsusho Corporation, Al Futtaim Group, UAE and PACO Pakistan. As the latter two founding partners declared divestments in 1998, Hino Motors Japan and Toyota Tsusho Corporation obtained majority shares in the company. Hino is listed on the Karachi and Lahore stock Exchanges. It was the first automobile company in Pakistan to have received the ISO-9001 and ISO-14000 certifications and also the first one to export buses from Pakistan.
Hinopak's plant is situated at SITE area in Karachi and the company specialises in the assembly, manufacture and sales of heavy and medium sized vehicles. These include trucks, buses and specialised vehicles for commercial use. The company incorporated the 3S network of automobile sales and servicing in Pakistan for the first time and was also involved in the provision of buses under the "Urban Transport Scheme", making it the largest supplier of urban buses notably in Punjab and Sindh.
PRODUCT LINE Hinopak is the largest bus manufacturer in Pakistan, designing and manufacturing a broad range of bus chassis and bodies. The bus line-up includes the Roadliner Supreme Luxury Bus for long journeys, Citiliner Intercity Buses, Citiliner Urban Buses, luxury Senator Coach and Rapidliner Deluxe Coach. The truck line up includes the 500 Series, the 300 Series (Dutro Light Duty Trucks) and Prime Movers. Moreover, the company also manufactures specially customised trucks.
SECTORAL REVIEW Both production and sales of trucks in the country grew significantly during the 10M FY14 at 33 percent and 32 percent, respectively. The year also witnessed growth in the production and sales of buses, at 25 percent and 26 percent, respectively. Truck sales took a sharp hike during December 2013 and then fell substantially during January 2014. Since then, truck sales have been slow to pick up and began to fall again during April 2014. Sales of buses have been relatively more volatile, and began to gradually pick up during April 2014. There are expectations of sales picking up in these categories with the initiation of mega projects by the current government.
FINANCIAL PERFORMANCE 9M FY14 While Hinopak's sales have picked up this year, the company's margins have grown incredibly, leading to a whopping increase in EPS from Rs 2.35 last year to Rs 50.31 this year. According to the latest corporate announcement, a final cash dividend of Rs 37.74 per share was recommended for the period. Gross profit registered an increase of 64 percent, along with a 131 percent increase in other income.
Notable reductions were observed in finance cost for the year, coming down by 124 percent. There has also been a considerable decline in loss on re-measurements in post employment obligations, which have come down sharply by 41 percent. However, the value of available for sale financial assets has grown negative this year. Consequently, the company registered a remarkable increase in 'other comprehensive income' for the year.
The company's market share in trucks remained steady at 44 percent compared with the corresponding period of last year. However, its market share in buses has now increased further from 81 percent last year to 88 percent this year. Cumulatively for the trucks and buses auto category, Hinopak remains the largest player with a total share of 52 percent in the sector. This share has come down marginally from 53 percent last year.
Appreciation in the value of rupee appears to have also contributed to higher margins for the company, aside from increased sales for the year. Total production of trucks and buses combined registered an increase of 28 percent for 9M FY14 compared with the corresponding period of last year, while sales increased by 24 percent.
FUTURE OUTLOOK Hinopak seems to have gained in its performance due to capital investments worth Rs 72 million meant for increasing productivity, improving technology and achieving higher safety and quality standards. Moreover, except for the month of October 2013, sales of trucks and buses have remained higher in the country this year compared with corresponding period of last year. The company seemed optimistic of "political forces encouraging the private sector emerging on the national scene", as reflected in the last Annual Report. The picking up of mega infrastructure development projects as announced by the government, along with other projects being undertaken by the private sector, is likely to propel the company's sales over the coming period.

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Hinopak Motors Ltd Key Financials 9MFY14

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Rs (mn)                             2014        2013

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Sales                            9208.42     7528.14

Cost of sales                  -7876.925   -6718.462

Gross profit                    1331.495     809.678

Distribution costs              -306.117    -295.129

Administrative expenses         -254.986    -206.266

Other income                     164.274      71.085

Other expenses                   -80.113      -6.293

Profit from operations           854.553     373.075

Finance income/(cost)             80.445    -324.999

Profit before taxation           934.998      48.076

Taxation                        -311.059     -18.885

Profit after taxation            623.939      29.191

Basic and diluted EPS (Rs)         50.31        2.35

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