CNG kit ban aggravating Suzuki sales

With the recent ban on import and installation of CNG kits by auto assemblers, Pak Suzuki Motor Company Limited (PSMCL), is bound to take a hit since, majority of its sales are of CNG variant models. On the flip side though, CNG unavailability and recent proposals to bring CNG prices at 80 per cent parity with petrol (as opposed to the current 55 per cent), along with a planned 25 per cent increase in CNG prices early next year, are poised to increase demand of smaller engine size vehicles (of which PSMC is the market leader) and likely to (at least partially) mitigate the impact of this ban.
The current Auto Industry Development Programme (AIDP) is also slated to be revamped during 2012, which adds to the uncertainties surrounding the sector.
9MCY11 earning review: PSMC’s bottom line grew by a whopping 73 per cent to Rs672mn, during 9MCY11 (9MCY10: Rs388mn), which translates to a 9MCY11 EPS of Rs8.16 (9MCY10: Rs4.71). Net sales witnessed a YoY upsurge of 22 per cent to Rs38.5bn, during the period under review, mainly on account of 7.5 per cent YoY price hikes and 17 per cent volume growth. A combination of improved gross margin in 9MCY11 (3.78 per cent versus 3.13 per cent in 9MCY10), higher operating efficiency, and a 5 per cent jump in other income is to be attributed to the improvement in the company’s bottom line.
3QCY11: Yellow cab scheme: With a QoQ PAT growth of a massive 109 per cent to Rs393mn (2QCY11: Rs187mn), commencement of taxi deliveries during September 2012 has indeed bode well for PSMCL, with its top line registering a 43 per cent QoQ increase to Rs15.3bn. The depreciating rupee and higher input costs squeezed gross margin by 35bps to 4.15 per cent, during the period under review. Bottom line also received support during the quarter in the form of a 16 per cent reduction in finance costs and lower effective tax rate (29 per cent versus 42 per cent in 2QCY11).