The Indus Motor Company (KSE ticker: INDU) was incorporated in 1989 as a joint venture with one of the largest business conglomerates in Pakistan, the House of Habib (HoH), Toyota Motor Corporation (TMC) and Toyota Tsusho Corporation (TTC) of Japan. INDU is involved in the manufacturing and marketing of Toyota and Daihatsu brand automobiles for domestic markets. The main products include variants of the signature 'Corolla' in the passenger cars' category, 'Hilux' in the light commercial vehicles' category and 'Fortuner' in the Sport Utility Vehicl (SUVs) segment.
INDU's assembly plant and offices are located at a 105-acre site in Port Qasim in Karachi. The product is delivered to customers across the country through a network of 37 independent 3S dealerships. Over the 24 years of the company's operations, INDU has sold over 500,000 CBU/CKD vehicles, while increasing production volumes from 20 vehicles per day in 1993 to 220 units per day currently. INDU's Corolla boosts to be the largest selling automotive brand model in Pakistan and is also considered as the 'number 1' in Toyota's Asian market.
A workforce of over 2,000 members is employed by the manufacturer. The Board of INDU comprises of nine members, with Ali S. Habib as the Chairman of the Board and Parvez Ghias and the CEO of the company.
On nine-month year-to-date basis, there was an increase of about three percent in overall volume demand to 100,220 units compared with 97,359 units that were sold during the corresponding period of FY13. Appreciation in the value of rupee has also been of benefit to the industry given the high share of imports in COGS.
Demand was driven by the launch of limited edition in the Corolla range and for commercial vehicles, supported by proactive marketing campaigns during the quarter. A new variant of Hilux Vigo Champ GX was also introduced and the company posits that it was well received by the market. The combined share of INDU for locally manufactured vehicles stood at 26 percent during the nine-month period of the outgoing fiscal year.
The company curtailed output due to suppressed market demand and took a 19-day shutdown thereby limiting production to 26,107 units for the nine-month period, compared to 25,113 units produced during the corresponding period of previous year. The demand for high end vehicles was also affected negatively owing to the imposition of 10 percent FED on the locally manufactured SUV Fortuner and full impact of higher duty including 17 percent GST in the case of Prius Hybrid CBU. Consequently, consumer demand tilted towards used imported luxury vehicles at lower customs duty valuation.
INDU registered a five percent growth in net sales revenue at Rs 44.7 billion, compared to Rs 42.7 billion during the corresponding period of last year. The company's margins increased by 34 percent during the period, posting Rs 2.3 billion compared with Rs 1.7 billion last year. Improved margins resulted from better sales volumes this year and rigid controls over fixed overheads and operational costs.
The company had earlier also urged the government to take note of recommendations proposed by PAMA to be incorporated into the awaited AIDP. INDU had posited that the government is losing billions of rupees in revenue annually due to lower valuation on both used vehicles and auto parts and had also called upon the government to reconsider the valuation of used vehicles, which inhibit sales of local manufacturers.
While Coralla's sales have been weakening over the last few months, they are expected to rise with the new model and, therefore, reposition INDU's dominant position in the 1,300-cc-and-above passenger car category. Sales of Fortuner are also expected to benefit from the 10 percent reduction in FED on 1,800-cc-and-above engine sizes.
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Key Financials
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Nine months ended 31 March
Rs (mn) 2014 2013 Chg (%)
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Net sales 44764.0 42695.8 4.8
Cost of sales 40772.9 39616.5 2.9
Gross profit 3991.1 3079.3 29.6
Distribution expenses -650.8 -585.5 11.2
Administrative expenses -455.0 -470.2 -3.2
Other operating expenses 268.5 217.5 23.5
Other income 750.3 728.8 3.0
Finance costs 19.5 19.2 1.5
Profit before taxation 3347.6 2515.7 33.1
Taxation 1026.7 785.6 30.7
Profit after taxation 2320.9 1730.1 34.1
EPS-basic and diluted (Rs) 29.5 22.0 34.2
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