AKD Quotidian about — PSMC: TP revision following stronger PKR

Karachi, March 21, 2014 (PPI-OT): Following swift PKR appreciation, subsequent incorporation of higher GMs and a revision in volume estimates, AKD Securities raises AKD Securities’ EPS estimates for PSMC by 6% on average.

According to AKD Securities, together will rollover onto Dec’14, AKD Securities’ target price for PSMC rises to PKR195/share (+12%). AKD Securities forecasts NPAT of PKRI, 892mn (EPS: PKR22.99) in CYI4F which represents normalized growth of 20%YoY (ox-sale of land in CYI3), leading to a double-digit projected 5yr NPAT CAGR (normalized).

That said, AKD Securities believes the stock’s 23%MTD rise has largely captured the positives where AKD Securities’ revised target price implies a Neutral stance. Factors that would induce us to revisit AKD Securities’ investment case include a sustained strong PKR (+ve) as well as the provisions of the upcoming auto policy.

CY13 result review: In line with AKD Securities’ estimates, PSMC posted NPAT of PKR1,849nm (EPS: PkR22.47) in CY13 vs. NPAT of PKR978mn (EPS: PKR1.88) in CY12, translating into reported growth of 89% Y0Y. Excluding the impact of the Punjab Taxi Scheme (CY12) and the gain on sale of land (CY13), normalized CY13 growth is estimated at 130%YoY. CY13 GMs clocked in at 6.4%, a 6yr high due to a weaker JYP, which enabled the company to shrug off the impact of lower volumes. Alongside the result, PSMC announced a PKR4/share dividend (payout ratio: 18%).

Growth drivers: After posting a 20%YoY decline in volumes in CY13 (ex- taxi scheme 7%YoY decline) to 76,818 unite nude with a higher competition from imported need vehicles, the company posted volumes of 14,030 units in 2MCY14 (New Year registrations uptick(. Going forward, margins are expected to remain buoyant due to a stronger PKR even as AKD Securities expects only marginal price increases across full-year CY14 (AKD Securities does not rule out a reduction in near- term prices ala INDU).

AKD Securities forecasts NPAT of PKR1 ,892mn (EPS: PKR22.99) in CY14F which represents normalized growth of 20%YoY (ex-sale of land in CY13), leading to a double-digit projected 5yr NPAT CACH (normalized).

Auto financing on the up: Outstanding stock of auto financing rose by an impressive 25%YoY growth to PkR56bn by end-Dec’13. Considering banks’ Interest rate margins continue to remain under pressure, AKD Securities sees this trend continuing. That said, this growth in auto financing is also partly due to finance purchase of imported cars where the upcoming auto policy understandably remains the key swing factor.

Investment perspective: Having gained 23%MTD/27%CYTD, PSMC trades at a forward P/E of 8.5x where the company’s current market capitalization is at a 6yr high. In AKD Securities’ view, while resumption of auto financing is a positive, the auto sector has yet to see a cyclical uptick ala CYO2-CYO7 (breakthrough contingent on new auto policy and sustained macro improvement). As such, AKD Securities believes auto stocks valuations will likely continue to trade at par with the broader market. AKD Securities’ revised target price of PkR1 95/share implies a Neutral stance.


PSMC: Valuations
Year End Dec CY12A CY1SA CY14F CY15F CY16F
EPS (PKR) 11.88 22.47 22.99 25.05 21.18
EPS Growth (%) 23% 89% 2% 9% 8%
PER (x) 16.38 8.66 8.47 7.77 7.16
ROE(%) 6% 11% 10% 10% 10%
ROA(%) 4.6% 8.0% 7.3% 7.3% 7.2%
BVS (PKR) 191.99 211.96 230.96 251.01 273.19
PIBVS (x) 1.01 0.92 084 0.78 0.71
GFS (PKR) 17.03 42.18 28.27 27.13 29.48
P/CFS (x) 11.43 4.62 6.89 7.18 6.61
DPS (PKR) 250 4.00 500 500 500
Dividend yield(%) 1.3% 2.1% 2.6% 2.6% 2.6%
Payout Ratio (%) 21% 18% 22% 20% 18%
Sales Growth 11% -13% 19% 12% 12%
Gross Margin 40% 64% 6.9% 6.6% 6.4%
Operating Margin 1.9% 34% 4.3% 4.1% 4.0%
Net Margin 1.7% 3.6% 3.1% 3.0% 2.9%
Source: Co. Reports and AKD Research
PSMC: Income Statement
(PKRmn) CY12A CY13A CY14F CY15F CY16F
Turnover – net 58,531 51,061 60,701 68,214 76,682
Cost of Sales 56,185 47,819 56,533 63,688 71,777
Gross Profit 2,346 3,243 4,169 4,526 4,906
Operating Profit 1,128 1,723 2,581 2,815 3,058
Other operating income 494 863 483 525 569
Other operating expenses 111 175 141 155 171
Finance costs 11 58 12 13 14
NPBT 1,500 2,353 2,911 3,172 3,441
Taxation 522 504 1,019 1,110 1,204
NPAT 978 1,849 1,892 2,062 2,237
Source: Co. Reports and AKD Research
PSMC: Balance Sheet
(PKRmn) CY12A CY13A CY14F CY15F CY16F
Current Assets 17,060 17,597 20,570 23,055 25,948
Fixed Assets 4,283 5,498 5,357 5,228 5,108
Total Assets 21,343 23,096 25,927 28,283 31,056
Current Liabilities 5,548 5,651 6,919 7,625 8,572
Long Term Liabilities – – – – -
Total Liabilities 5,548 5,651 6,919 7,625 8,572
Equity 15,801 17,444 19,008 20,658 22,483
Liabilities and Equity 21,349 23,096 25,927 28,283 31,056
Source: Co. Reports and AKD Research

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