Pak Suzuki Motor Company Limited Overview and Outlook

Pak Suzuki Motor Company Ltd.  

CY13 earnings to remain robust! 

Karachi Stock Exchange: Pak Suzuki Motor Company Limited (PSMC) reported 1HCY13 PAT of PKR1.2bn (EPS PKR: 14.05) showing a decline of 16%YoY, due to decline in volumetric sales (absence of Punjab taxi shceme & discontinuation of Alto). However on a QoQ basis, 2q earnings showed a remarkable growth of 120% due to Yen weakening, one off land sale gain & lower tax rate booked by the company. Going forward in 2HCY13, while volumes will remain subdued, we are foreseeing earnings to remain robust due to improvement in gross margins. Since Yen deterioration impact comes with a lag of 6 months and steel prices have also remained subdued, we reiterate our stance of 130% earnings growth in CY13. Trading at CY13 P/E of 5.2x, we maintain our “Buy” stance.

Margins augmentation & one off gain boosted QoQ earnings!   

Karachi Stock Exchange: QoQ decline of 4% in volumetric sales has been witnessed in 2QCY13, with major decrease observed in S. Bolan, Cultus, Liana & Swift by 6% to 21%. S. Ravi sales on the other hand increased by 8% QoQ. The real highlight of 2q was gross margins a ugmentation from 4.7% to 7.0% which was due to lagged impact of Yen wakening and full quarter inpact of last prioce riase (done in Jan 2013). In addition to above, the company has recorded one-off gain of PKR274 mn in 2QCY13 against the sale of old motorcycle plant which further boosted the earnings by PKR3.33/share. The above factors have resulted in QoQ earnings rising by 120%. YoY earnings during 1 HCY13 dipped by 16%, due to higher volumetric base effect (absence of Punjab Taxi Scheme & discontunuation of Alto).

Future outlook  

Karachi Stock Exchange: Going forward in 2HCY13, even though volumes will remain subdued, we are foreseeing earnings to remain robust due to improvement in gross margins. Since Yen deterioration impact comes with a lag of 6 months and steel prices have alsi remained subdued, CY13 earnings growth will remain robust. Based on prelimin ary estimates (July & August volumetric data), in Karachi Stock Exchange we project 3QCY13 EPS to click in around PKR 8-10/share. The recent uptick in Yen will aggect Pak Suzuki Motor Company PSMC earnings in CY14 as around 50% of its purchases are Yen based and the company will have to pass on the cost hike in order to maintain its margins. PSMC is panning to introduce a new car which is rumoted to be Suzuki Wagon R 1.0, later this year with a more efficient 3-cylinder998 cc K10Bengine which looks like an ideal replacement of Suzuki Alto.

About the Company 

Pak Suzuki Motor Company PSMC is a public limited company with its shares are quoted on Karachi and Lahore Stock Exchanges in Pakistan. The company has 82.30mn shares outstanding. Presently the company having a production capacity of 150,000 units perannum for cars and 44,000 units for motorcycles. The company was formed in August 1983 in accordance with the terms if a joint venture agreement between Pakistan Automobile Corporation Limited (PACO) and Suzuki Motor Corporation (SMC)- the holding company maintaining 73.09% shareholding in PSMC. The company is engaged in the assembling, progressive manufacturing and marketing of Suzuki cars, pickups, vans, 4*4s, motorcycle and related spare parts. The company has discontinued the production of Alto a populer car in the 1,000 cc category form July 2012. The plant and Registered office of the company are situated at DSU-13. Pakistan Steel Inductrial Estate, Bin Qasim, Karachi.