Project on Indus Motor Company

1. Project Presentation
GROUP MEMBERS
-ASIF AHMED AWAN -SOBIA
-KUMAIL BURNEY -SHAHZAIB AYYAZ
-GHULAM MUSTAFA -ALI RAZA ALVI

2. COMPANY INTRODUCTION
 It is a joint venture between House of Habib of Pakistan, Toyota Motor Corporation (TMC), and Toyota
Tsusho Corporation (TTC) of Japan.
 Incorporated in 1989, as Public Limited Company
 Board Composition:10 BODs – 9 Men 1 Female
 The Company manufactures and markets Toyota brand vehicles in Pakistan which includes:
 Flagship Corolla and Yaris in the passenger (with multiple variants) car segment,
 Hilux in the light commercial vehicle segment, and
 Fortuner in the sports utility vehicle segment
 Two Types of Manufacturing
Rush
Land Cruiser Prado
Land Cruiser 200
Camry Hybrid
Avanza
Prius
Coaster
Hiace
Corolla Cross
C
B
U
C
K
D
Corolla
Yaris
Hilux
Fortuner

3. INDUSTRY STATS
Major Competitors of Indus Motors are:
 Pak Suzuki Motor Company- PSMC
 Honda Atlas Cars - HCAR
 Hyundai - Nishat Motors
 Kia Motors (Lucky Group)
The total industry sales of locally-manufactured PC and LCV vehicles were 279,267 units in the
country during 2021- 22 compared to 181,397 units sold last year (54% growth in unit sales).
 Indus Motor Company has in FY 2021-2022 sold 75,611 units (27% of units)
IMC is in process of plant expansion for adding new facilities to introduce locally assembled Hybrid
CKD model in the Pakistani market.
 First to introduce hybrid vehicles in Pakistan.
 The project is expected to be completed in FY 2023-24.

4. Market Share (By Revenue)
32%
17%
43%
8% Suzuki Sales - PSMC
Honda Sales - HCAR
Toyota Sales - INDU
Hyundai - Nishat Motors

5. Valuation of Indus Motors
 We have calculated intrinsic value of the company through Free Cash Flow to Firm (FCFF)
Method and Dividend Discount Model (DDM)
 We have also Calculated Market Multiples of the company for relative valuation
 Calculated Cost of Debt, Cost of Equity, WACC and short-term and long-term growth rates for
for discounting of cash flows/dividends
 We have used historic data of last 6 years 2017-2022 and projected financial statements for
next 6 years from 2023 to 2028.
 Basis used for forecasting of financial statements include prevailing and expected economic
conditions, historic trends and links between different line items.

6. Weighted Average Cost of Capital
(WACC)
 Indus Motors has almost 100% equity based capital
structure. If it borrows loans, that is too for short-term.
 Currently the company has negligible amount of loan in
its balance sheet; however to account for small amount of
loans we have used 1% of Debt and 99% of equity in or
WACC Calculation.
 Risk-free rate is taken as 3-years PIB rate.
 Beta is calculated through regression and same has been
verified from alternate sources i-e brokerage house
websites.
 market returns are takes from PSX KSE-100 returns

7. Growth Rate Calculation
 Growth rate has been calculated as follows:
 Calculated average payout ratio for last 6 years 2017-2022
 Accordingly, Retention ratio was calculated as 1- payout
ratio.
 Average ROE has been calculated for last 6 years i-e 2017-
2022.
 Finally, by multiplying retention ratio with Avg ROE we get
growth rate, that is 12%
 Long-term (steady) growth rate is expected to be at
lower than this rate therefore we have used 6% as long-
term growth rate.

8. FCFF Valuation
 FCFF has been calculated based on forcasted valued of income statement and balance sheet.
 Terminal value has been calculated based on long-term growth rate after year 2028.
 Discounting all FCFFs at WACC we get the intrinsic value of 2082.6 per share; indicating that
stock

9. DDM Valuation
 Dividends paid in year 2022 has been grown with short-term growth rate till 2028.
 Terminal value has been calculated based on long-term growth rate.
 Discounting all dividends and terminal value at Cost of Equity we get 1,245/- per share
indicating that stock is undervalued based on current market price.

10. Alternate DDM Valuation
 Alternatively, if we take values of estimated dividends based on forecasted values in financial
model and discount them back at cost of equity we get value of 2,265/- per share which also
indicate that stock is undervalued based on current market price.

11. Assumptions Used in Valuation
 Company might face reduction in sales due to economic condition of pakistan and restrictions
on import and LCs
 Owing to economic conditions of pakistan, Interest rates are likely to be on higher side for at
least 2 years.
 Company's other Income will be only from banks and Financial Instruments
 It is expected that company will have high investment in fixed income due to higher interest
rates
 It is expected that interest rates will slide down after 2 years
 It is assumed that taxes will be paid in the same financial year
 It is assumed that there will be no new issue of shares in future

12. Market Multiples

13. Thank You