February 10, 2020 (PPI-OT)

INDU: EPS to decline 65% YoY in 2QFY20

Indus Motors (INDU) is expected to announce EPS of Rs14.96 in 2QFY20, a decline of 65% YoY, in its board meeting scheduled for Feb 19. We expect the company to announce interim cash DPS of Rs6.0 (Rs25.0 in SPLY).

Volumes shrank by 57% YoY in 2QFY20, whereas gross margins are expected to recede by 272bps YoY.

We maintain a Hold stance on the stock.

We preview Indus Motor's (INDU) 2QFY20 earnings ahead of the company's board meeting scheduled for February 19. We expect the company to announce a profit after tax (PAT) of Rs1,176mn (EPS: 14.96), effectively a decline of 65% YoY. Alongside the result, we expect the company to announce interim cash DPS of Rs6.0. Volumes during the quarter shrank by as much as 57% YoY, leading to expectations of a 45% YoY plunge in net sales. Gross margins are similarly expected to recede by 272bps YoY amid higher cost of imported raw materials due to devaluation over the previous year.

Distribution expenses for INDU are forecasted to rise by 40% YoY due to higher promotional and marketing expenses, whereas Other Income is expected to decline by 51% YoY owing to lower cash and short term investments amid lower cash advances for bookings. On a QoQ basis, earnings are expected to fall by 11%, mainly on the back of 27% expected reduction in Other Income. During 1HFY20, EPS is anticipated to contract by 64% YoY to Rs31.73. Although the second half of the fiscal year (Jan-Jun) is typically more productive for the INDU (and the auto sector), volumes will nevertheless most likely remain subdued when compared to the same period last year. We maintain a 'Hold' stance on the stock.

© Pakistan Press International, source Asianet-Pakistan