Islamabad, Feb 19: Millat Tractors Limited (PSX: MTL) has reported a 31% decline in profit after tax for the first half of FY25, posting Rs. 3.6 billion (EPS: Rs. 19.01) compared to Rs. 5.2 billion (EPS: Rs. 27.36) in the same period last year. However, the company’s quarterly earnings showed a positive turnaround, with a 3% YoY increase in profit for 2QFY25 to Rs. 3 billion (EPS: Rs. 15.86) and a massive 434% QoQ surge.
According to Topline Securities, gross margins fell to 25.4%, marking a 350 basis point decline on a QoQ basis, despite an increase in sales. This dip is attributed to lower-priced sales under the Punjab Government’s Green Tractor Scheme, which significantly boosted unit sales. The company recorded a tax reversal of Rs. 67 million during the quarter, which provided some relief to earnings.
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The Green Tractor Scheme played a crucial role in driving sales, with unit sales increasing by 194% QoQ to 7,541 units, leading to a 149% increase in net sales to Rs. 19.5 billion. In contrast, the previous quarter faced operational challenges due to SRO 563(1)/2022 and a 10% sales tax imposition in Budget FY25, which had led to a buildup of sales tax refunds.
Higher sales volumes also led to increased expenses. Distribution expenses jumped by 58% QoQ, while other expenses skyrocketed by 724% QoQ due to higher Workers’ Profit Participation Fund (WPPF) and Workers’ Welfare Fund (WWF) charges.
Alongside its results, Millat Tractors announced a dividend of Rs. 45 per share, which was higher than market expectations. Analysts speculate that the company may have cleared a backlog of dividends as it finalizes a merger transaction.
Currently, MTL is trading at FY25/26 forward price-to-earnings (PE) ratios of 14.22x and 9.46x, respectively. With the government-backed tractor scheme boosting sales and the company overcoming past operational challenges, MTL’s financial trajectory will be closely watched in the coming quarters.
