GoP considering to remove ban on company fitted CNG cylinders – Alfalah Securities Limited

Karachi: The government is likely to remove ban on company fitted CNG cylinders in locally assembled vehicles after facing objections from diplomatic missions from Japan, Italy and Argentina that the ban would result in incurring huge financial losses to their companies.

According to Alfalah Securities Limited, while allowing removing a ban, the Federal Board of Revenue (FBR) has proposed to impose an import duty of 10% on CNG kits and cylinder to discourage the utilization of CNG and increase the prices of CNG fitted vehicles. Alfalah Securities Limited believes the lifting of ban on imported CNG kits and cylinders would bode well for the automobile sector particularly for Pak Suzuki Motor Company (PSMC) as their car off takes would increase.

PSMC has reported a profit after tax of PKR 794.42 million (EPS: PKR 9.65) in CY11 against PKR 211.14 million (EPS: PKR 2.57) last year, depicting a massive increase of 276%YoY. This massive growth in earnings is attributable to improvement in gross margins to 3.54% against 2.35% last year and a 7.9%YoY increase in other income to PKR 620.4 million. The company has also announced a cash dividend of PKR 2 per share to be distributed among its shareholders. Alfalah Securities Limited recommends a Buy on PSMC based on its CY11 P/E of 6.5x and a dividend yield of 3%.