UNITED MOTORS [UML: LKR70.0]
Posted on the August 2nd, 2012 under Analysts View by Softlogic Equity Research 
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ANALYST SIGNAL – ‘REMAIN VIGILANT OF THE FUTURE’
‘A 136.6% YoY growth in 1QFY13 headed by improved GP margins and deliveries of pending orders to permit holders’
Excerpts of the attached:
Earnings Talk :
UML remained stable with a 136.6% YoY growth in 1QFY13 to LKR968.6 mn (up 40.7% QoQ). UML’s initiation into FY13 with high excise duties and exchange rates were overruled as it delivered the remaining 50% orders of permit holders who yield 100% margins with only local charges. Strategic pricing of its current portfolio of vehicles as it concentrates on the fast moving less costly vehicles now, has enabled to preserved its GP margin levels.
ANALYST COLUMN…
A rough climate for motor players
According to Motor Traffic Department of Sri Lanka, a total of 234,388 vehicles have been registered for 1H2012, which is down 6% YoY. Motor companies lost Year 2010 steam after vehicle sales jolted when the Government retraced its steps to again heighten excise duties on vehicle imports in March 2012. Buses, lorries and trucks however remained untouched. Situation worsened with a few other deleterious aspects smoking up.
Rupee Devaluation
High Interest Rates
Cars and motor cycles face tough challenges
Hambantota port, diverting all vehicle shipments
Banks have been made to limit lending for cars
UML has always been on top of motor stock picks. Although UML reported sturdy profit figures for 1QFY13, the next quarters of FY13 is questionable. The counter trades at a trailing PER of 2.4X Vs. the sector PER of 2.5X and trades below its book value at 0.7X trailing PBV.
UML, always proved to be with a steady gear…
Small commercial truck market being targeted next
Locally assembled vehicles to overrule adversity of high import costs
Reduced gearing
