Indus Motor profit surges 32% in 1QFY26
Higher gross margins lift earnings above expectations
Indus Motor Company Ltd (INDU) reported a 32% year-on-year rise in profit to Rs6.7bn for the first quarter of FY26, translating into earnings per share (EPS) of Rs85.49. The quarterly performance exceeded market expectations, driven by stronger-than-anticipated gross margins despite lower sequential sales and production bottlenecks.
According to the company’s results, gross margins improved to 17.1% in 1QFY26, up from 13.4% in the same period last year and 13.3% in the previous quarter. Analysts attributed the margin expansion to better product mix and controlled input costs, offsetting pressures from the newly imposed electric vehicle (EV) adoption levy and temporary supply disruptions.
Net sales rose 48% year-on-year to Rs61.74bn, although down 11% quarter-on-quarter as demand cooled following record sales in the prior quarter. The company sold 9,889 Toyota units during the quarter, a 61% increase from 6,160 units a year earlier but lower than 11,775 units in 4QFY25, reflecting typical cyclical moderation after year-end buying.
Operating expenses followed volume trends, with distribution costs up 5% year-on-year but down 13% quarter-on-quarter. Administrative expenses climbed 46% from last year, while other expenses rose 52%, largely mirroring the growth in operating profits. Other income fell 35% year-on-year to Rs2.9bn, reflecting lower cash balances and reduced returns amid easing interest rates. The effective tax rate edged higher to 39% from 38% a year earlier.
Alongside the results, Indus Motor declared a first-quarter dividend of Rs51 per share, maintaining a payout ratio of 60%, consistent with its policy of high shareholder returns. The company continues to hold a strong balance sheet, with minimal leverage and steady cash generation.SBP tighten regulations for Auto Financing
Topline analysts said that Pakistan’s auto sector is showing gradual recovery following supply-chain normalization and improved foreign exchange availability. According to the Pakistan Automotive Manufacturers Association, total passenger car sales rose 25% year-on-year in the first quarter of FY26, supported by new model launches and easing import restrictions. However, higher taxes on locally assembled vehicles and sluggish consumer financing remain key risks.
Indus Motor shares are currently trading at an estimated FY26E/FY27F price-to-earnings ratio of 5.7x and 5.2x respectively, keeping the stock attractively valued in the auto sector. Analysts maintain a BUY stance on Indus Motor, citing margin resilience, stable dividend policy, and expected volume recovery under the government’s auto revival roadmap.
