Profile
Legal Structure
Loads Limited ('Loads' or 'the Company') was incorporated on 01-Jan-79 as a private limited company. The Company got listed on Pakistan Stock Exchange (PSX) in 2016.
Background
Over the years the Company has expanded itself and currently, it has four subsidiaries including Specialized Autoparts Industries (Pvt) Ltd., Multiple Autoparts Industries (Pvt) Ltd., Specialized Motorcycles (Pvt) Ltd., and Hi-Tech Alloy Wheels Ltd. Primary business of these companies is the manufacturing and selling of motor vehicle parts.
Operations
The Company manufactures radiators, exhaust systems, and sheet metal components for automobiles, showcasing a diverse product range. Key clients include Toyota, Honda, Suzuki, Hino, Nissan, Isuzu, Massey-Ferguson, Mitsubishi, Yamaha, among others. It operates two manufacturing plants, DSU 19 and DSU 38, situated at Port Qasim, Karachi. Additionally, Loads possesses an in-house facility for dye designing and manufacturing, equipped with advanced CNC automatic machines.
Ownership
Ownership Structure
The major stake (~37.67%) is held by Mr. Syed Shahid Ali. While, Treet Corporation Limited (Associated Company) holds (~12.5%), followed by Others (~10%), Directors (~3.86%) and Insurance Companies (~0.02%). The general public holds the remaining stake of ~ 36%.
Stability
The ownership of the Company is expected to remain stable in the future.
Business Acumen
The Sponsors, Treet Corporation Limited is a leading Pakistani conglomerate with over 70 years of experience, drives innovation across various industries such as automotive, personal care, healthcare, packaging, and energy storage. It operates through several listed and public subsidiaries or associated companies.
Financial Strength
Over the years the Company maintained its financial strength. Going forward, in case of any financial support, the Sponsors will assist the Company.
Governance
Board Structure
The overall control of the Company lies with a seven-member Board. The BoD comprises three Non – Executive, two Executive and two Independent Directors. The Board has a dominating presence of Sponsors with one female director.
Members’ Profile
The Chairman of the Board, Mr. Syed Shahid Ali holds an overall experience of more than four decades and is associated with the Company since 01-Jun-05. He is also the Chairman of Treet Corporation Limited and is on the Board of various companies. Mr. Munir K. Bana is the Vice Chairman and holds an overall experience of more than four decades. He has been associated with the Board since 1996. Other members of the Board carry diversified professional experience and have served in leading positions.
Board Effectiveness
During FY24, the Board met six times. The Board is assisted by two committees namely; Audit Committee and Human Resources & Remuneration Committee. Both the committees are chaired by Independent Directors. The minutes of the meetings are formally documented.
Financial Transparency
External Auditors M/S Yousaf Adil, Chartered Accountants has issued an unqualified audit report pertaining to the financial statements for FY24. The firm is QCR rated and on SBP's panel in category "A".
Management
Organizational Structure
The Company operates through nine departments namely: (i) Finance, (ii) IT, (iii) Import, (iv) Human Resource & Admin (HR), (v) Technical, (vi) Special Project & Development, (vii) Production, (viii) Material Planning & Sales and (ix) Quality Assurance / ISO. Head of Finance, IT and Import reports to CFO. While, Heads of operational departments report to Chief Executive Officer (CEO), who then reports to the Board. However, the Head of Internal Audit and HR functionally reports to the respective Board committe, and administratively to the CEO.
Management Team
Mr. Mohtashim Aftab has been appointed as the Chief Executive Officer (CEO) of Loads, effective from 17-May-24. He brings an overall experience of 30 years in business partnering, strategic planning, and risk management. He also serves as the CEO and Director of all subsidiaries of Loads. Mr. Shamim Ahmed Siddiqui has served as the Chief Financial Officer (CFO) of the Company since 2005 and holds an overall experience of above three decades. He is associated with the Company since 1984. The other management team members are comprised of seasoned professionals, each with a range of expertise in their respective fields.
Effectiveness
The Company has an operational management committee to monitor overall operations. The committee is chaired by the CEO and comprises senior management. The committee meets monthly to monitor the operational challenges and strategies.
MIS
The Company utilizes an SAP system for generating daily, weekly and monthly reports, alongside other extensive data capabilities. It has upgraded its facilities and integrated advanced machinery to meet increased demand and enhance operational efficiency.
Control Environment
The Company has obtained quality certifications IS0-14001 and IS0-9001, demonstrating its emphasis on producing high-quality products.
Business Risk
Industry Dynamics
Pakistan's auto industry is a part of large scale manufacturing, accounting for ~73% of the overall value of manufacturing activities within the country. The industry is fairly fragmented with a large number of players. There are over ~2,000 Automotive Parts vendors in Pakistan, of which ~400 vendors belong to the Tier-1 category and are suppliers for the OEM market. The demand is primarily driven by auto sales and are met through OEMs, replacements and export markets; while, the remaining is met through imports. However, during FY24, production level and thus, sales of auto industry posted a decline, primarily due to import restrictions imposed by the SBP; encompassing essentials like CKD and SKD kits. Overall the sector’s margins remain sensitive to inflation, interest rates, and exchange rate.
Relative Position
Loads primarily generates sales from exhaust systems and dominates nearly 100% of market share with major OEMs.
Revenues
The Company derives revenue from the sale of auto parts including: exhaust systems (~59%), sheet metal components (~38%), and radiators (~3%) during FY24. During FY24, the Company witnessed a decline in revenue by ~0.1%, reported at ~PKR 4,940mln (FY23: ~PKR 4,944mln) due to decrease demand in the auto industry. During 1QFY25, the Company witnessed an increase in revenue by ~44.5%, reported at ~PKR 1,227mln (1QFY25: ~PKR 849mln) due to increased demand from OEMs. Going forward, the automobile industry is expected to witness an improvement.
Margins
Gross profit margin during FY24, clocked at ~19.6% (FY23: ~16.3%), due to a decline in manufacturing expenses. The effect trickled down to the operating margin which was reported at ~13.8% (FY23: ~10.5%). During FY24, the net profit margin witnessed a significant improvement reported at ~18.4% (FY23: ~ 27.9%) attributed to the gain on disposal of Korangi land and building. During 1QFY25, the Company reported a gross profit margin of 25.2% (1QFY24: ~18.5%) due to the trickle-down impact of increased revenue during the period. The increase in gross margin trickled down to net margin, reported at ~6.5% (1QFY24: ~1%).
Sustainability
Under current economic conditions, the Company's sustainability remains highly stretched as business and financial risks are elevated. Thus, a formal and materialistic business plan is required to revamp Loads' overall outlook. Any delay in managing the overall risks would impact the ratings. Hwever, sponsors technical and financial support provides comfort.
Financial Risk
Working capital
As of FY24, the net working capital days improved to ~95 days (FY23: ~130 days), primarily attributable to decreased inventory days (FY24: ~84 days, FY23: ~109 days) along with an uptick in trade payable days reported at ~38 days (FY23: ~33days). Trade receivable days declined to ~49 days (FY23: ~54 days). As of 1QFY25, net working capital days stood at ~89 days (1QFY24: ~125 days) due to a significant decrease in inventory days, indicating increased demand for the Company’s products. The Company holds a minimal borrowing cushion.
Coverages
As of FY24, Free Cash Flow from operations (FCFO) of the Company increased by ~29% and stood at ~PKR 432mln (FY23: 335mln), owing to profit before tax of ~PKR 257mln (FY24: ~(PKR 1,772mln)). This resulted in an improved FCFO/Finance cost coverage reported at ~1x (FY23: ~0.6x). As of 1QFY25, the Company reported FCFO of ~PKR 174mln (1QFY24: ~PKR 90mln), resulting in a coverage ratio of ~2.1x (1QFY24: ~0.5x).
Capitalization
As of FY24, the leveraging ratio stood at ~24% (FY23: ~44%), owing to ~48% reduction in short term borrowings as the Company is streamlining its working capital requirement through internal cashflows. While, total borrowings, including long term and short term borrowings, have reduced by ~47% and stood at ~PKR 1,235mln (FY23: ~PKR 2,312mln). Equity posted an uptick due to profit accumulation and stood at ~PKR 3,829mln (FY23: ~PKR 2,970mln). As of 1QFY25, the Company followed the similar trend and leveraging ratio stood at ~24% (1QFY24: ~41%). Shareholders’ equity increased by ~32%, reported at ~PKR 3,909mln (1QFY24: ~PKR 2,966mln), whereas total borrowings stood at ~PKR 1,236mln (1QFY24: 2,093mln).
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