Millat Tractors Earnings Drop 72% YoY, Missing Expectations

Staff Report:
Millat Tractors Limited (MTL) reported a 1QFY25 profit of Rs570 million (EPS of Rs2.97), a decrease of 75% YoY and 72% QoQ, slightly below expectations.

Net sales declined 62% YoY and 64% QoQ to Rs7.8 billion in 1QFY25, in line with forecasts, as operational challenges persisted due to SRO 563(1)/2022 and a 10% sales tax imposed in the FY25 budget, which delayed sales tax refunds. Unit sales fell to 2,566, marking a 64% drop both YoY and QoQ.

Effective October 23, GST on tractors rose to 14% to reduce the sales tax refund backlog. Despite this, a recovery is anticipated, supported by the Punjab government’s Green Tractor Scheme and the repeal of SRO 563(1)/2022, broadening the customer base. For more details, see our report, Millat Tractors Limited (MTL) – Sales Volumes to Normalize After SRO Cancellation (Oct 24, 2024).Tractor Sales Set to Normalize After SRO Rescission

Gross margins reached a record 27.88% for 1QFY25, outperforming expectations, with 4QFY24 and 1QFY24 margins at 20.69% and 23.12%, respectively.

Distribution expenses decreased by 29% YoY but rose 14% QoQ to Rs355 million. Administrative expenses grew by 34% YoY and declined 5% QoQ to Rs312 million in 1QFY25.

Other income dropped 61% YoY and increased 43% QoQ to Rs58 million, while finance costs surged 179% YoY and 3% QoQ to Rs545 million.

The effective tax rate for 1QFY25 was 41%, compared to 38% in 1QFY24 and 43% in 4QFY24.

MTL is currently trading at a forward PE of 14.22x for FY25 and 9.46x for FY26.