AKD Quotidian about — INDU: Reinitiating Coverage

Karachi, September 23, 2013 (PPI-OT): AKD reinitiate coverage on Indus Motor Company Limited (INDU) with a target price of PkR400/share which implies upside of 21%.

According to AKD Securities, with the company’s focus on high-end models, AKD Securities does not expect INDU’s sales to be unduly impacted by the increasing interest rate environment; instead, outlook for margins is strong with the Fortuner carving a niche for itself and the new Corolla model set for launch by mid-2014.

At the same time, while the JPY has started to appreciate vs. the PkR, the JPY/PkR parity is still lower than last year’s levels (currently at 1.07 vs. FY13 avg. of 1.11). AKD Securities expects INDU to post NPAT of PkR3.9bn (EPS: PkR49.0I) in FYI4F, up 15%YoY, with room for further growth in sales of the high-margin Fortuner surprise. At current levels, this translates into a FYI 4F PIE of 6.7x, at a discount of 15% to the broader market’s multiple which AKD Securities expects will contract going forward. Buy!

Review and Outlook: FY13 profitability of INDU was down by 22%YoY to PkR3.36bn (EPS: PkR42.72) after record high profits in FY12. In FY14F, AKD Securities project NPAT of PkR3.85bn (EPS: PkR49.O1), up 15%YoYon higher unit sales. That said, if 40FY13 NPAT of PkR1.6bn (EPS: PkR2U.71) is anything to go by, , AKD Securities’ FY14F projections can turn out to be conservative.

In this regard, 4QFY13 profitability was boosted by a strong debut by the Fortuner SUV and although its sales have tapered off since, any uptick in the same came propel INDU’s profits. Over the medium-term, AKD Securities expects INDU’s overall sales to grow at a CAGR of 6.4% while AKD Securities keep average GMs at 7.5% vs. the l0yr average of 8.9%

                                                  INDU: Valuation Multiples and Ratios
                                                  Year End June 30           FY11A    FY12A      FY13A       FY14F       FY15F
                                                  EPS (PkR)                   34.90    54.74      42.72       49.01      51.20
                                                  EPS Growth (%)              -20%      57%        -22%         15%         4%
                                                  PER (x)                      9.46     6.03       7.73        6.74       6.45
                                                  ROE (%)                      19%      25%        19%          20%        19%
                                                  ROA (%)                    10.2%    15.6%       13.4%       14.6%      13.8%
                                                  BVS (PkR)                  179.64   216.46     225.10      249.60     270.08
                                                  P/BVS (x)                    1.84     1.53       1.47        1.32       1.22
                                                  CFS (PkR)                   12.66    23.93      12.30       35.71      53.45
                                                  P/CFS (x)                   26.10    13.80      26.87        9.25       6.18
                                                  DPS (PkR)                   15.00    32.00      25.00       24.00      30.00
                                                  Dividend yield (%)           4.5%     9.7%       7.6%        7.3%       9.1%
                                                  Sales Growth                  3%      25%        -17%         17%        17%
                                                  NPAT Growth                 -20%      57%        -22%         15%         4%
                                                  Gross Margin                 6.6%     8.5%       9.2%        8.8%       8.2%
                                                  Operating Margin             4.8%     6.6%       6.9%        6.9%       6.3%
                                                  EBITDA Margin                8.2%   10.0%        9.8%        8.8%       7.8%
                                                  EV/EBITDA (x)                4.24     2.80       3.42        3.27       3.15
                                                  Net Margin                   4.4%     5.6%       5.3%        5.2%       4.6%
 Source: Company Reports and AKD Research
                                                  INDU: Income Statement
                                                  (PkRmn)                    FY11A    FY12A      FY13A       FY14F       FY15F
                                                  Volumes (units)            50,943   55,060     38,517      41,051     43,297
                                                  Turnover - net             61,703   76,963     63,829      74,521     87,173
                                                  Cost of Sales              57,614   70,401     57,972      67,946     80,047
                                                  Gross Profit                4,089    6,562      5,857       6,575      7,126
                                                  Operating Profit            2,936    5,114      4,399       5,157      5,525
                                                  Other operating income      1,508    1,776      1,038       1,165      1,099
                                                  Other operating expenses     356      516         436         539        580
                                                  Finance costs                 77       61          31          34         38
                                                  NPBT                        4,011    6,312      4,970       5,749      6,006
                                                  Taxation                    1,268    2,010      1,612       1,897      1,982
                                                  NPAT                        2,743    4,303      3,358       3,852      4,024

Source: Company Reports and AKD Research

                                                  INDU: Balance Sheet
                                                  (PkRmn)                    FY11A    FY12A      FY13A       FY14F       FY15F
                                                  Current Assets             22,588   24,089     22,188      23,745     26,617
                                                  Fixed Assets                4,247    3,487      2,918       2,675      2,617
                                                  Total Assets               26,835   27,576     25,105      26,420     29,234
                                                  Current Liabilities        12,261   10,396      7,413       6,802      8,006
                                                  Long Term Liabilities        454      166          -           -           -
                                                  Total Liabilities          12,715   10,562      7,413       6,802      8,006
                                                  Equity                     14,120   17,014     17,693      19,619     21,228
                                                  Liabilities and Equity       26,835   27,576     25,105      26,420     29,234

Source: Company Reports and AKD Research

The post AKD Quotidian about — INDU: Reinitiating Coverage appeared first on AsiaNet-Pakistan.

The post AKD Quotidian about — INDU: Reinitiating Coverage appeared first on AsiaNet-Pakistan.

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