Case –Valuation and Investment in Indus Motor Company Harvard Case Solution & Analysis

Case –Valuation and Investment in Indus Motor Company Case Solution

Basic Information

          Indus Motor Company Limited is a joint venture between “House of Habib” and Toyota Motor Corporation for assembling, partial manufacturing and marketing of Toyota vehicles in Pakistan. Indus Motor Company is the manufacturer, assembler, distributor and importer of Toyota and Daihatsu vehicles, spare parts and accessories in Pakistan. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are primarily quoted on the Pakistan stock exchange. Toyota Motor Corporation has 25% stake in the company equity. Most of the shares of Indus Motor Company are held by House of Habib.A lot of investment was done to make its production facilities based on state of the art technologies. In order to ensure highest level of productivity, the world-renowned Toyota Production Systems are implemented. The mission of Toyota is to provide safe and sound journey to its customers. Toyota is developing various new technologies,which include energy saving and diversifying energy sources. In 2013, Indus Motor was awarded by a top corporate excellence award from the Management Association of Pakistan. Indus Motor Company is categorized in automobile assembler sector in the Pakistan stock exchange. The automobile sector is one of the important sectors in terms of market capitalization as it has Rs. 376 billion market capitalization. At the time of the inception of the company, its share price was Rs 45, and currently it is trading at Rs.1322. The symbol of the company in Pakistan stock exchange is INDU: KAR. Indus Motor is a stable company having batter prospects of future as well as the current income stream investment in Indus motor is good for long term capital appreciation. The market capitalization of Indus motor is Rs.98 Billion and the target price of Indus Motor is Rs. 1398/share.(KSE, 2016)

Significant Recent Developments

            Recent Decrease in Interest rate: The government of Pakistan announced reduction in interest rates, which resulted in increased car financing, positively affecting the sales of automobiles in the country. Currently, auto financing contributes to around 30% of the sales of the cars.

            The Agriand Taxi schemes:These are initiatives of the government which also had a good impact on the local auto industry sales. It is expected that other OEMs products such as IMC’s Hilux will also be included in such schemes.

            Increase in Import Duties: The Government of Pakistan realized that imported products were damaging the local market as well as led to the loss of employment in the country, which is why the increase in import duty is imposed by the government, which has resultedin an increase in the sales of local producers.

IMC achieved following milestones during the year ended:

  • Sales volume for the period of 64,584 units up by 13% from 57,387 units last year;
  • Record Production of 64,096 units up by 13% from 56,888 units, last year;
  • The net sales revenue of Rs 108.8 billion and PAT of Rs 11.5 billion, attributable to higher sales volume and margins, and tighter control on fixed costs;

Investment Recommendation:Indus motor company performed well in the past as well asit has good future prospects for growth in market share.It has provided reasonable payouts as well therefore,it is recommended that investing in Indus Motor Company would be a feasible decision.....................

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