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Agriauto Industries (PSX: AGIL) was incorporated in 1981 and is one of the leading automotive parts manufacturer in the Pakistan. The company over the years has done technical collaborations with various international companies and is the first company in Pakistan to acquire TS16949 certification.

The product line of the company includes shock absorbers and struts which are manufactured under technical assistance agreement with KYB Corporation and Gabriel Ride Control USA. Motorcycle shock absorbers assembly and its components such as pipe forks, case dampers and piston rod. Tractor parts such as steering boxes which are produced on automatic CNC machines. The company also manufactures window regulators and door hinges.

Agriauto established a wholly owned subsidiary by the name of Agriauto Stamping Company (Pvt.) Limited in 2012. Technical assistance Agreement was signed with Ogihara Thailand Company Limited and commercial operations started in July 2014. Since then this subsidiary has been adding to the profitability of the company and has been running at optimum capacity. The press installed here caters to low and high tensile parts.

The customers of the company include Pak Suzuki, Indus Motors, Atlas Honda, Millat Tractor, Al-Ghazi Tractor and Hinopak Motors.

Agriauto is part of the Habib group 'House of Habib' which is one of the oldest and diversified groups in Pakistan. Some of the top group companies include Indus Motors, Thal Limited, Shabbir Tiles and Ceramics, Habib Insurance Company and Habib Metropolitan Bank.

Historical Performance: The financial performance of the company is directly linked with auto sales in the country and the accounts have mimicked that situation. After a lull period of in 2013 and 2014, the sales of the company picked up in FY2015 and FY2016. The major reasons for increase in sales were the uptick in demand for new cars, new models being introduced by auto-makers and the Punjab Taxi Scheme.

FY2015 also saw the start of stamping plant which boosted both the top line and the bottom line of the company. The success of the stamping plant can be gauged by the fact that in FY2016, the subsidiary accounted for 20 percent of the company sales and almost 35 percent of the net profit.

Recent Performance: The company in its HYFY17 result report a decline in sales due to closure of Taxi scheme in Punjab. The gross margins improved by 100bps on account of tractor and motorcycle parts sale.

The margins of the company would have been higher if prices of raw material especially steel had not gone up. The government also imposed anti-dumping duties in which grade of steel required for auto and auto-parts manufacturing was also included. The margins are expected to balance out in the next quarter as the company would likely pass on the increase to its customers.

The finance cost of the company saw a massive decline while taxation increased. The company also announced a cash dividend of 2.5 rupees with the result.

Shareholding Pattern: Associate company Thal Limited owns 7.3 percent shares of Agriauto and as is the case with many Habib group companies a foreign company called Robert Finance Corporation AG owns about 25 percent shareholding of the company. Mutual funds and individuals hold about 8 percent and 30 percent shares of the company respectively.

Performance vs. KSE-100: AGIL stock price performance over the last one year has been hot and cold. After underperforming for months, the stock had a significant rally around its 2016 annual result. The stock price went up about 50 percent and stayed higher until the start of 2017. Since January 2017 the stock price has been coming down as investors are not sure about the margins of the company going forward and also the drop in sales was not appreciated by the investors. The 52- week low of the stock is 172 rupees while the 52-week high is 361 rupees.

Currently the stock is consolidating around the 290 rupee-level and has found strong support here.

Future Outlook: With the announcement of the long awaited auto policy and the subsequent expansion announcements of existing and new automakers in Pakistan, the auto-parts industry is set to benefit the most. No automaker can setup shop without developing its vendors and that is where companies like Agriauto come in. Auto sales have seen remarkable growth during the last two years and this trend is likely to continue as new models are coming into the market, while auto financing has also picked up. The company has also invested in bringing new products and increase its range. Localization of parts is very necessary to improve margins for automakers and they are focused in developing new parts and bringing in new technology into Pakistan.





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AGIRAUTO INDUSTRIES HYFY17 SNAPSHOT

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PKR ('000) HYFY17 HYFY16 YoY

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Net Sales 3,467 3,489 -1%

Cost of Sales 2,775 2,840 -2%

Gross Profit 692 649 6%

Distribution Costs 54 54 0%

Admin expenses 101 86 15%

Other charges 47 38 19%

Other income 18 16 11%

Finance cost 256 3,490 -1263%

Profit before tax 507 483 5%

Taxation 151 113 25%

Profit after tax 356 370 -4%

EPS 12.38 12.86 -4%

Gross margin 20% 19% up

100bps

Net margin 10% 11% down

100 bps

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Source: Company Accounts.

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AGRIAUTO INDUSTRIES PATTERN OF SHAREHOLDING (AS OF JUNE 30, 2016)

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Thal Limited 2,115,600 7.30%

Directors and their Spouses and minor Children 13,909 0.01%

Robert Finance Corporation AG 7,171,681 24.90%

Individuals 8,808,561 30.59%

Joint Stock Companies 1,868,215 6.49%

Banks, DFIs, NBFIs, Insurance, Pension Funds 891,083 3.09%

Mutual Funds 2,307,340 8.01%

Foreign Shareholding* 12,356,523 42.90%

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Source: Company Accounts, Zakheera (some shareholders are repeated)

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