By: Syed Sufyan Subhani
Taurus Securities Limited
Indus Motor Company Limited: Weak Japanese Yen (JPY) and renewed buyers’ demand for new Corolla have improved fortunes of the Indus Motors. In today’s INSIGHT, we preview INDU 2QFY15 results and expect EPS of PKR19.98 which is up 39% QoQ and 232% YoY. We feel that 51% QoQ and 93% YoY jump in volumes is the major reason behind the earnings growth while favorable exchange rate parity would have propelled the margins. To recall, JPY has depreciated by 8.9% QoQ against local currency during 2QFY15. During 1HFY15, INDU EPS would be PKR34.32, up 99% and the board may also announce interim DPS of PKR15/share.
For coming quarters, we see INDU to keep operating at full capacity amid strong consumer demand for new Corolla. Apart from revenues growth, improvement in profits would also come from incoming benefits of weak JPY. For FY15, we expect INDU to post record profits of PKR7.0bn (EPS of PKR88.5) which is 79% higher than last year EPS of PKR49.32. We maintain our Hold call on the stock with the Jun-15 TP of 949 PKR/share. However, investors can consider taking entry in the scrip if bears resurface and INDU takes a dip at KSE. At current levels, the scrip is trading at FY15 PE of 10.0x.