Financial Analysis of Toyota Indus Motor Company

2017

Financial Analysis of Toyota Indus Motor Company Financial Year 2011-2016

Ayesha Majid

Lahore School of economics 5/1/2017 Financial Analysis of Toyota Indus Motor Company i

Table of Contents Preamble ...... 1 Categories of Financial Ratios Analysed ...... 1 Limitations ...... 2 Toyota Indus Motors...... 3 Company Profile ...... 3 Financial Profile ...... 3 Introduction ...... 4 Mission Statement ...... 5 Vision Statement ...... 5 Slogan ...... 5 Quote Summary as on 1st May 2017 ...... 6 SWOT Analysis ...... 8 Industry Analysis ...... 9 Competitors ...... 10 Porter’s Five Forces of the Automotive Industry ...... 13 Threat of New Entry (Weak): ...... 13 Supplier power (Weak): ...... 13 Buyer power (Strong): ...... 13 Threat of Substitutes (Weak): ...... 13 Competitive Rivalry (Very Strong): ...... 14 Future Plans ...... 14 Ratio Analysis ...... 15 Liquidity Ratios ...... 15 1. Current Ratio ...... 16 2. Quick Ratio ...... 16 3. Acid Test Ratio...... 16 4. Inventory Turnover ...... 17 5. Receivables Turnover ...... 17 6. Days Sales in Inventory ...... 17 7. Days Sales in Receivables ...... 17 8. Operating Cycle ...... 18 Financial Analysis of Toyota Indus Motor Company ii

Profitability Ratios ...... 19 1. Return on Sales ...... 19 2. Gross Profit Margin ...... 19 3. Operating Profit Margin ...... 20 4. EBIT to Sales ...... 20 5. EBITDA to Sales ...... 20 6. Return on Assets (ROA) ...... 20 7. Return on Equity (ROE) ...... 21 8. Return on net operating Assets (RNOA) ...... 21 9. Return on capital (ROC) ...... 21 Solvency Ratios ...... 22 1. Liabilities to Equity ratio ...... 22 2. Total Leverage ...... 22 3. EBITDA Coverage Ratio ...... 23 4. Times Interest Earned ...... 23 Asset Utilization & Efficiency Ratios ...... 24 1. Sales to Asset ratio (Asset turnover) ...... 24 2. Sales to Average Net Working Capital ...... 24 3. Sales to Fixed Assets turnover ...... 24 Market Value Ratios ...... 25 1. Price Earnings Ratio ...... 25 2. Dividend Yield ...... 25 3. Market to Book Value ...... 25 Du-Pont Analysis ...... 26 Conclusion & Recommendations ...... 28 References ...... 29 Balance Sheet ...... 30 Income Statement ...... 31 Cash flow Statement ...... 32 DuPont ...... 32 Ratios ...... 32 Benchmark ...... 34 Financial Analysis of Toyota Indus Motor Company 1

Preamble

I have conducted this project as a part of my Bachelor’s Course: Financial Statement Analysis. The project is creäted on five years of Annual Financial Statements of the company from 2011 to 2016. In evaluation for industrial benchmark, average of three companies is used; due to time and resource constrains. The competitors’ ratios were obtained from peers doing their term project on the respective companies. The competitors are Pak Suzuki Motors, Honda Atlas and Ghandhara Nissan Motors Limited.

Categories of Financial Ratios Analysed

The accounting ratios are clustered in to five categories:

1. Liquidity Ratios

The ratio shows the extent to which the firm can meet its financial obligations. Used to gauge a company's ability to pay off its debts in short term.

2. Profitability Ratios

It is a measure of the capacity to make a profit, and a profit is what has remained from income earned after you have deducted all costs and expenses these ratios relate to profits to sales and assets.

3. Asset Management Ratios

Measures the speed with which various accounts are converted into sales or cash- inflows or cash-outflows. That is the firm's success in managing its assets to generate sales.

4. Debt Management Ratios

It shows the extent to which a firm uses debt financing or leverage. It assess the financial leverage and financial flexibility of a firm.

5. Market Value Ratios Financial Analysis of Toyota Indus Motor Company 2

These ratios are a measure of the return on investment, and whether the prices are over/under priced.

Limitations

Availability of the resources in gathering of data and information is one of the major limitation to be considered when different methods and sources employed. In addition, 100% accuracy cannot be guaranteed, as there are be very small chances that sources may not be reliable which result in inaccuracy of information. Aside from that, there are no primary data that was used due to time and cost constraints. There are many limitations to using ratio analysis such as;

 operating and accounting policies differ from firm to firm,  ratios are static and do not consider future trends,  firms may have divisions operating in many different industries,  historical cost not suitable for future decision,  industry figures may be biased by few large firms within the industry and,  different capital structure and size cannot be compared easily.

Financial Analysis of Toyota Indus Motor Company 3

Toyota Indus Motors

Company Profile

 Industry: Automotive  Legal Form: Limited Liability  Type: Public (Joint venture) Company  Stock Symbol: KSE: INDU  Regulatory Authority:  Founded: 1 July 1990  Pakistan Automotive  Registration Number: 0020742 Manufacturers Association  NTN: 0676546-7 (PAMA)  ISO-14001 certified  The Overseas Investors  Headquarters: Karachi, Pakistan Chamber of Commerce &  Parent : Toyota Motor Industry (OICCI) Corporation, Toyota Tsusho  Karachi Chamber of Corporation, House of Habib Commerce & Industry  Share Type: Free-float (KCCI)  No. of Shares: 12,211,044  Pakistan Business Council  Auditor: A.F. Ferguson & Co. (PBC)  Address: Plot No. Nwz/1/P-1,Port  Market Leader score: 1st with Qasim Authority,Bin Qasim three competitors Karachi  Pricing power: High  Website: www.toyota-indus.com Financial Profile

 Revenue in PKR (TTM): 108.82bn  NET INCOME IN PKR: 11.63bn  Employees: 27700

Financial Analysis of Toyota Indus Motor Company 4

Introduction

Indus Motor Company Limited (IMC) was incorporated in 1989 through a joint venture agreement between “House of Habib” of Pakistan, “Toyota Motor Corporation” and “Toyota Tsusho Corporation” of Japan. IMC stocks are listed in Karachi Stock Exchange (Guarantee) Ltd, Lahore Stock Exchange (Guarantee) Ltd and Islamabad Stock Exchange (Guarantee) Ltd, now they have combined to Karachi Stock Exchange.

The House of Habib is a prominent Khoja business family in Pakistan. The Habib group's most famous and successful subsidiary is its Banking and Finance division. Founded in 1937, Toyota Motor Corporation is a Japanese company that engages in the design, manufacture, assembly, and sale of passenger cars, minivans, commercial vehicles, and related parts and accessories primarily in Japan, North America, Europe, and Asia. Current brands include Toyota, Lexus, Daihatsu and Hino. Toyota Motor Corporation is the leading auto manufacturer and the eighth largest company in the world. Toyota Tsusho Corporation is a sōgō shōsha, a member of the Toyota Group. Toyota Tsusho has a worldwide presence through its many subsidiaries and operating divisions, including over 150 offices, and 900 subsidiaries and affiliates around the world. Toyota Tsusho is the trading arm of the Toyota Group. It enriches society by creating value by the company as Metals; Global Production Parts; Logistics; Automotive; Machinery; Energy; Project; Chemicals; Electronics; Food and Agribusiness; Consumer Products and Services.

Indus Motor has permission to manufacture, assemble, distribute and import Toyota and Daihatsu vehicles, spare parts and accessories in Pakistan. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan. IMC is associated with Toyota Motor Corporation, Japan; Toyota Tsusho Corporation, Japan; Thal Limited; Habib Insurance Company Ltd & Mohamed Ali Habib Welfare Trust. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity and majority shareholdings is with house of Habib.

Indus Motor Company’s plant is the only manufacturing site in the world where both Toyota and Daihatsu brands’ products are manufactured. IMC's Product line includes Financial Analysis of Toyota Indus Motor Company 5

6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore.

The Company's segments are based on its business activities, which include manufacturing and trading activities. The main product offerings include Corolla, Hilux and Fortuner. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented.

The Company has played a major role in the development of the entire value chain of the local auto industry and is proud to have contributed in poverty alleviation at the grass root level by nurturing localization that, in turn, has directly created thousands of job opportunities and transferred technology to over 60 vendors supplying parts.

On average, the company has sold 50,000 units a year but sales surpassed the 60,000 mark in FY16 as demand boomed and has a niche market for Fortuner. Its parent company Toyota motors stood 5th in world leading global brands 2016. Mission Statement

Mission of IMC is to provide safe & sound journey. IMC’s mission is reflected in company’s slogan. Vision Statement

“To be the most respected and successful enterprise, delight customers with a wide range of products and solutions in the automobile industry with the best people and best technology.” Slogan

“Actions, Commitment and Teamwork to become No.1”

Thus, they aim at delivering excellence.

Financial Analysis of Toyota Indus Motor Company 6

Quote Summary as on 1st May 2017

Index: KMI 30

Market: Karachi Stock Exchange

Ticker: INDU

Market Capital: ₨160,344.00

Book value: ₨ 57,536,994

Enterprise Value: ₨70,071,183

Beta: 1.24

Last Price: ₨2,040.00

Volume: 21,920

Turnover: 16,673,785

52 Week High ₨2,110.00

52 Week Low ₨884.75

Previous Price Close: ₨2,020.27

Previous Price Open: ₨2,000.00

Change: ₨19.73 (+0.98%)

Price to Earnings (P/E TTM): 13.93

Earnings per Share (EPS TTM): 146.46

Dividend Yield: 30 (November 24, 2016) Financial Analysis of Toyota Indus Motor Company 7

Financial Analysis of Toyota Indus Motor Company 8

SWOT Analysis

Strengths Weakness

 skilled workforce  competitive market  Customer Loyalty’  small business units  Strong Management  Weak Supply Chain  Kaizen culture practiced  High Debt Burden  Financial Leverage

 The most valuable automotive brand in the world  Toyota Production System  Competence in hybrid vehicle production  monetary assistance provided by parent companies Opportunities Threats

 global markets  increase in labour costs  new products and service  cash flow

 income level is at a constant  Rising Japanese yen exchange increase rate  new products and services  Increasing competition in the worldwide automotive market  venture capital  Shift of consumer to imported  Fuel prices are expected to rise in used car the near future increasing  growing competition and lower demand for hybrid cars profitability  Demand for autonomous vehicles  increase in labour costs  Timing and frequency of new  tax changes model releases  financial capacity needed  Government policy for  low barriers of market entry revitalization of sick units  High industry growth rate

Financial Analysis of Toyota Indus Motor Company 9

Industry Analysis

IMC is part of automobile industry of Pakistan, that produces automobiles and other gasoline powered vehicles, such as buses, trucks, and motorcycles. It has an oligopoly market structure operating at price-oriented model. The leading manufacturing Parent companies for the industry are Toyota, Suzuki and Honda.

The industry started in 1949 when General motors & company set-upped their first plant. According to Ministry of Industries, Pakistan produced its first vehicle in 1953, at the National Motors Limited. It is among the key sectors of Pakistan economy. Car industry saw boom in 2006-2007 when sales touched record peak of 1,808,346. The auto industry is considered an oligopoly with Toyota, Honda and Suzuki being the market leaders.

The industry merely operates under the rising urban buying, technical cooperation agreements and franchise with Chinese, Japanese, Korean and European Automobile Manufacturers. Even then Pakistan falls in the category of the few manufacturers in the world who are producing or assembling all kinds of vehicles, ranging from trucks & buses, 2/3 wheelers, motorcars, prime movers, tractors and LCVs.

The main producer associations in the sector are PAMA (Pakistan Automotive Manufacturers Association), PAAPAM (Pakistan Association of Automotive Parts and Accessories Manufacturers) and APMA (Association of Pakistan Motorcycle Assemblers). All of the associations provide basic and useful information to their members. Furthermore, the Engineering Development Board (EDB) maintains data about the automotive industry. The industry faces the highest tariff levels.

Figure 1 Souce: IGC Financial Analysis of Toyota Indus Motor Company 10

Market Share

The market share remained 20 percent and under, till FY08 but this share reached 35 percent in FY10 and today, Corolla has a share of 32 percent in the car market. Other cars have come and gone but Corolla has remained a mainstay the country's car industry. The company is having a slower FY17 so far, with a decline in sales numbers for both Corolla and Fortuner and clinched earnings as a result compared to FY16.

Competitors Financial Analysis of Toyota Indus Motor Company 11

Afzal Motors 3. Al-Ghazi 4. Al-Haj Faw Motors 5. Atlas Honda 6. Crown Motor Company 7. Dewan Farooque Motors 8. Ghandhara Motors 9. Ghandhara Nissan 10. Ghani Motors 11. Hinopak Motors 12. Honda Atlas 13. Indus Motors 14. Karakoram Motors 15. Kausar Motors 16. Master Motors 17. Millat Motors 18. Omega Motors 19. Pak Suzuki Motors 20. Raazy Motors 21. Ravi Motorcycles 22. Sazgar 23. Sitara Auto Impex 24. Sohrab 25. Super Asia Motors 26. United Motors 27. Volvo Pakistan 28. Yamaha Pakistan Financial Analysis of Toyota Indus Motor Company 12

Financial Analysis of Toyota Indus Motor Company 13

Porter’s Five Forces of the Automotive Industry Threat of New Entry (Weak): § Large amount of capital required § High retaliation possible from existing companies, if new entrants would bring innovative products and ideas to the industry § Few legal barriers protect existing companies from new entrants § All automotive companies have established brand image and reputation § Products are mainly differentiated by design and engineering quality § New entrant could easily access suppliers and distributors § It is very hard to achieve economies of scale for small companies § Governments often protect their home markets by introducing high import taxes Supplier power (Weak): § Large number of suppliers § Some suppliers are large but the most of them are pretty small § Companies use another type of material (use one metal instead of another) but only to some extent (plastic instead of metal) § Materials widely accessible § Suppliers do not pose any threat of forward integration Buyer power (Strong): § There are many buyers § Most of the buyers are individuals that buy one car, but corporates or governments usually buy large fleets and can bargain for lower prices § It doesn’t cost much for buyers to switch to another brand of vehicle or to start using other type of transportation § Buyers can easily choose alternative car brand § Buyers are price sensitive and their decision is often based on how much does a vehicle cost § Buyers do not threaten backward integration Threat of Substitutes (Weak): § There are many alternative types of transportation, such as bicycles, motorcycles, trains, buses or planes § Substitutes can rarely offer the same convenience Financial Analysis of Toyota Indus Motor Company 14

§ Alternative types of transportation almost always cost less and sometimes are more environment friendly Competitive Rivalry (Very Strong): § Moderate number of competitors § If a firm would decide to leave an industry it would incur huge losses, so most of the time it either bankrupts or stays in automotive industry for the lifetime § Industry is very large but matured § Size of competing firm’s vary but they usually compete for different consumer segments § Customers are loyal to their brands § There is moderate threat of being acquired by a competitor Future Plans Indus Motor Company means to exhibit mindful corporate direct all through the whole range of its exercises and operations. Through its CSR program, "Concern Beyond Cars", Indus Motor Co. has contributed over Rs 200 million in the previous 5 years for wellbeing, training, welfare, condition and street security ventures, in this manner assuming a critical part in area of its operations and continues to do so. Currently their main plan is to introduce “Toyota Mira” a hydrogen-fuel-cell powered car in Pakistan after its global launch.

Toyota has notably reversed from its 2014 claims that it would not develop a driverless car on safety grounds. August 2016 has seen it double down on its university efforts, with a further $22M investment to the University of Michigan to drive robotics and self- driving research. The company has targeted 2021 as a goal for deploying “AI car features” to the road. Toyota plans to apportion effort among its research partners, the University of Michigan, Stanford and Massachusetts Institute of Technology (MIT).

Financial Analysis of Toyota Indus Motor Company 15

Ratio Analysis

Liquidity Ratios

Liquidity Ratio According to company financial statement they are in Strong Liquidity position and they are able to pay their liabilities very well. Indus motor will not face any problem in paying back its short-term liabilities however, Honda may have problem to satisfy its short-term obligations when they come due. This is strong point for investors to invest in Indus motor and least likely with Honda (a major competitor in sedan category).

Liquidity Ratios 95

0 Current Ratio Quick Ratio Acid-test Inventory TO Days Sales in Receivables Days Sales in Operating Ratio Inventory TO Receivables Cycle

2016 2015 2014 2013 2012 Financial Analysis of Toyota Indus Motor Company 16

1. Current Ratio

2016 2015 2014 2013 2012 TIM 1.58 1.53 3.35 2.99 2.32 CA 2.21 2.17 3.34 2.71 1.80 The current Ratio of the company has declined over the years after reaching its all- time peak in 2014. In 2015, the figure is almost half of previous year because of sharp increase in accounts payable and advances from customers. The company outperformed the competitors’ average throughout the whole period. Throughout the period, the ratio has stayed close to the benchmark of 2:1 depicting active asset management by the finance team. 2. Quick Ratio

2016 2015 2014 2013 2012 TIM 1.55 1.48 3.18 2.78 2.23 CA 1.34 1.25 1.57 1.37 0.93 The quick ratio mimicked current ratio, has stayed above general benchmark of 1.5:1 in first half, and came very close to it in later half for the same reasons as current ratio. The ratio on its own indicates a good financial health of the company. The figures are slightly above of competitors’ average and has maintained a leading position since 2012. Apart from 2015, the ratio has stayed fairly above benchmark of 1.5:1 showing that there is room for improvement, a better management of quick assets can be done, and there are still assets, which can be used in money market securities. 3. Acid Test Ratio

2016 2015 2014 2013 2012 0.129375 0.220496 1.438151 0.752502 1.176546 The acid test ratio has declined after 2014 and is well below the benchmark of 1:1 hence the company should arrange for highly liquid assets like marketable securities and money market securities or will be in danger of facing liquidity issues arising from mismatch of maturities of assets and liabilities. The company only has 0.1 rupee of highly liquid asset for every rupee of debt taken.

Financial Analysis of Toyota Indus Motor Company 17

4. Inventory Turnover

2016 2015 2014 2013 2012 TIM 12.76 15.04 8.11 7.36 10.36 CA 7.25 8.19 6.03 6.05 6.44 From 2013, the turnover has risen for three consecutive years after a sharp drop in 2013. Indicating towards better inventory management and/or higher sales turnover. Thus, days to sell inventory and sales turnover ratios need to be analysed to reach a conclusion. Indus motors outperformed industrial average in the period by an average of 4 points; e.g. in 2016 it had a 12.8 times turnover and competitors’ average was of 7.25 times only. 5. Receivables Turnover

2016 2015 2014 2013 2012 TIM 26.84 15.79 10.33 8.53 7.86 CA 92.05 171.87 42.12 54.06 74.18 Receivables turnover is continuously increasing over the years showing good credit management by the firm or a move towards strong credit policy by the management. The increase can also be because of a decrease in accounts receivable collection period. Moreover, is well below the competitors’ benchmark of 90-38 times. 6. Days Sales in Inventory

2016 2015 2014 2013 2012 TIM 28.61 24.27 45.02 49.57 35.22 CA 54.49 56.57 70.81 72.64 85.24 The days to sale inventory, has an irregular pattern and is pegged to inventory management. On the other hand, industrial average improved from 61days in 2012 to 50 days in 2016 indicating to faster production and sale of the industry. The company’s turnover period remained almost half of the competitors’ average over the years depicting customer inclination in favour of their product. 7. Days Sales in Receivables

2016 2015 2014 2013 2012 TIM 13.60 23.11 35.35 42.79 46.44 CA 26.29 30.53 27.81 21.17 19.50 The collection period of the company has decreased through the period and has led to an increase in Receivables turnover. Has a much better recovery rate as compared Financial Analysis of Toyota Indus Motor Company 18 to competitors. The day’s sales in inventory was longer than day’s sales in receivable trough out the period. This shows that Indus motor is quite efficient in collecting their credit within a short time from credit customers. 8. Operating Cycle

2016 2015 2014 2013 2012 42.20248 47.37914 80.36953 92.35801 81.66102 The operating cycle of the company has halved in the period analysed, which means that the company is making and then selling its inventory in half the time it previously used to do so. This is partially due to decrease in days sales in inventory and account receivables. The ratio tells the time taken by the company to free its cash locked in inventory thus a decrease in the ratio means better liquidity for the company.

Financial Analysis of Toyota Indus Motor Company 19

Profitability Ratios

Indus motor has higher results of profitability as compared to its competitors in the whole period and managed to make some profits in 2012 when its competitors’ were facing losses in Pakistani automobile industry.

Profitability ratios 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Return on Gross Profit Operating EBIT to EBITDA to Return on Return on Return on Return on Sales Margin Profit Sales Sales Assets Equity net Capital Margin (ROA) (ROE) operating Assets (RNOA)

2016 2015 2014 2013 2012

1. Return on Sales

2016 2015 2014 2013 2012 TIM 10.53% 9.44% 6.79% 5.26% 5.59% CA 10.12% 9.06% 5.38% 2.20% -1.27% Its return on sales is continuously increasing indicating towards greater efficiency in generating profits. Return on Sales remained slightly above the industrial average during the whole period, which means that IM is more profitable as, compared to its competitors. 2. Gross Profit Margin

2016 2015 2014 2013 2012 TIM 16.30% 14.76% 10.15% 9.18% 8.53% CA 16.70% 13.99% 10.45% 7.54% 4.70% In the whole period GP margin has outperformed the industrial margin and has increased at the same pace as the industry. This indicates development in industry’s production techniques and influx of economies of scale in automobile industry, which lowered the cost of production.

Financial Analysis of Toyota Indus Motor Company 20

3. Operating Profit Margin

2016 2015 2014 2013 2012 TIM 16.00% 14.64% 8.79% 7.79% 8.20% CA 13.96% 11.00% 7.29% 3.42% 0.42% Operating margin is a measurement of what proportion of a company's revenue is left after paying for variable costs of production such as wages, raw materials. Over the years, operating profit margin has increased maintaining the position of market leader. The gap between gross profit margin and operating profit margin has decreased as well, indicating a decrease in factory over-heads and other operating expenses. Another reason could be that the company’s product price rise is more than the rise in its manufacturing costs. This rise will result in wealth creation for shareholders due to increased profitability. 4. EBIT to Sales

2016 2015 2014 2013 2012 TIM 16.07% 14.70% 8.86% 7.83% 8.28% CA 15.32% 13.58% 8.86% 5.18% 2.68% It moved closely with GP margin. It has remained almost 0.08% higher than Operating Profit margin in every years. The movement was parallel to Return on Assets and at a lesser rate as compared to Return on Equity (ROE). Increase in EBIT is mainly due to growth of net revenue, good cost control and strong productivity, 5. EBITDA to Sales

2016 2015 2014 2013 2012 TIM 16.09% 14.72% 23.68% 19.80% 16.95% CA 16.31% 14.68% 14.36% 9.80% 6.90% The ratio kept on fluctuating because of changes in fixed assets over the years. Hence, the contribution/impact of depreciation charge has hampered the ratio otherwise; it should have been in the same direction as EBIT to sales. 6. Return on Assets (ROA)

2016 2015 2014 2013 2012 TIM 21.23% 23.81% 15.13% 12.75% 15.82% CA 19.22% 17.45% 9.32% 4.89% 2.78% ROA was parallel to EBIT/Sales except for the 2015 in which it rose at a greater proportion as compared to EBIT/Sales. The ratio indicates a greater return on every Financial Analysis of Toyota Indus Motor Company 21 rupee invested on assets, which means a continuous betterment in asset management of the company. The margin of outperforming the industry also decreased over the years.

Looking at the Fixed Asset Turnover ratio investors are more likely to invest in Indus Motor Company because of large generation of revenue from these assets. Higher Total Asset turnover of Indus Motor shows that company can operate with fewer assets than other less efficient competitors can, and so requires less debt and equity to operate. The result is of this high ratio is comparatively greater return to its shareholders. 7. Return on Equity (ROE)

2016 2015 2014 2013 2012 TIM 44.34% 41.46% 20.60% 19.35% 27.64% CA 40.85% 46.15% 28.08% 11.64% -4.58% In 2016 and 2014, the ratio was below the industrial average. ROE had both upwards and downwards movement during the period indicating towards a fluctuating return to shareholders. 8. Return on net operating Assets (RNOA)

2016 2015 2014 2013 2012 TIM 52.82% 57.64% 29.39% 34.23% 75.23% CA 37.41% 36.49% 16.29% 35.62% 27.92% RNOA moved in the same way as ROA but with the greater magnitude indicating towards a greater volatility in current assets as compared to noncurrent assets. The company has failed to decrease its Cost of Sales percentage over the years. The management explains that this failure is a result of appreciation in the value of Japanese Yen, but the company has also increased its prices over the years. 9. Return on capital (ROC)

2016 2015 2014 2013 2012 41.64% 38.04% 19.60% 19.09% 25.53% IM’s ROC has increased over the years, which means that the management is creating increasing wealth for the shareholders. Return on capital indicates how effective a company is at turning capital into profits therefore an increase in ratio implies greater profitability. Financial Analysis of Toyota Indus Motor Company 22

Solvency Ratios

The higher degree of debt ratio shows the greater the firm’s degree of indebtedness. Debt ratio for Indus Motor is low which can be manageable by the company. The firm has comparatively lower debt ratio than industry showing less gearing by the firm hence less chances of running into a credit crunch (solvency issues).

Solvency Ratio Leverage cover 2.0 450 1.5 400 350 300 1.0 250 200 0.5 150 100 0.0 50 0 Liabilities to Equity ratio Total Leverage EBITDA Coverage Ratio Times Interest Earned 2016 2015 2014 2013 2012 2016 2015 2014 2013 2012

1. Liabilities to Equity ratio

2016 2015 2014 2013 2012 TIM 1.082 1.097 0.311 0.419 0.621 CA 0.949 1.059 0.961 1.805 3.362 The debt to equity ratio has increased over the years indicating a shift to aggressive capital over conservative capital. This ratio measures the proportion of total assets financed by the firm’s creditors. The higher degree of debt ratio shows the greater the firm’s degree of indebtedness. Debt ratio for Indus Motor is low which can be manageable by the company. 2. Total Leverage

2016 2015 2014 2013 2012 TIM 1.709 1.855 0.458 0.587 0.810 CA 1.707 1.840 2.340 5.424 6.598 Total Leverage has increased over the years as it is pegged to D/E ratio of the firm. It is slightly below the industrial average in the period. This implies that Indus motor is more leveraged than its competitors are.

Financial Analysis of Toyota Indus Motor Company 23

3. EBITDA Coverage Ratio

2016 2015 2014 2013 2012 TIM 226.511 273.912 353.239 411.589 213.878 CA 362.586 175.130 144.573 139.900 72.082 The company has enough earnings to pay off its debt and lease obligations. Nevertheless, it has a lower ratio as compared to Honda atlas in 2016, which is a whooping number of 810 times. Thus, Honda has surpassed Indus motor in generating operating profits in the year 2016 while in previous years Indus Motors maintained its lead position. 4. Times Interest Earned

The company has a high TIE indicating towards a good financial health. In addition, is continuously rising.

Financial Analysis of Toyota Indus Motor Company 24

Asset Utilization & Efficiency Ratios

Sales to Fixed Assets turnover

Sales to Avg NWC

Sales to Asset ratio (turnover)

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

2012 2013 2014 2015 2016

1. Sales to Asset ratio (Asset turnover)

2016 2015 2014 2013 2012 Toyota Indus Motors 1.89 1.92 2.19 2.54 2.79 Average 1.93 2.11 1.93 1.95 1.67 Indus motor now makes rupees1.89 from every rupee invested in assets. The ratio is declining throughout which means that the company need to plug in more money in assets to reap the same amount of profits. This can because of a rise in material and/or either labour cost or because of obsolesce of plant and machinery. Resulting in lower output/ increased maintenance cost of the plant and machinery. 2. Sales to Average Net Working Capital

2016 2015 2014 2013 2012 Toyota Indus Motors 6.94 6.91 3.96 4.48 6.41 Average 9.63 38.88 2.32 -1.88 0.30 The working capital turnover is improving since 2014, which means an increase in revenue generation for every amount of rupee invested by the shareholders. However, it is below benchmark output of Rs. 9.63 for every rupee of working capital invested. 3. Sales to Fixed Assets turnover

2016 2015 2014 2013 2012 Toyota Indus Motors 22.11 18.62 9.46 23.28 22.16 Average 13.59 11.70 8.19 11.23 9.42 Indus motor makes more sale from every rupee invested in fixed assets. The ratio is continuously increasing since 2014 with the same rate as of the benchmark. Financial Analysis of Toyota Indus Motor Company 25

Market Value Ratios

11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Price Earning Ratio Dividend Yield Market to Book Value

2016 2015 2014 2013 2012

1. Price Earnings Ratio

2016 2015 2014 2013 2012 Toyota Indus Motors 11.23 10.78 10.92 7.28 4.48 P/E ratio is well below the industrial benchmark 19.80 (reuters, 2017). Currently the investors are willing to pay 11.23 rupees for one rupee of earnings of the firm. 2. Dividend Yield

2016 2015 2014 2013 2012 Toyota Indus Motors 0.06 0.06 0.05 0.08 0.13 The dividend yield is stable and too low to P/E ratio. The firm is paying 0.06 rupees to shareholders for every rupee they have invested in Indus Motor Company. 3. Market to Book Value

2016 2015 2014 2013 2012 Toyota Indus Motors 4.65 4.08 2.12 1.38 1.13 For every one rupee of firm’s book value, the investors are willing to pay 4.65 rupees. Thus, the stock are being traded at premium. The ratio is increasing in the period, which means that the firm’s market value is increasing. Financial Analysis of Toyota Indus Motor Company 26

Du-Pont Analysis

DuPont Analysis 3

2.5

1.5

0.5

0 2016 2015 2014 2013 2012

ROE Total Asset Turnover Profit Margin Equity Multiplier

2016 2015 2014 2013 2012 ROE=ROA*EM=TAT*PM*EM 0.4146 0.3790 0.1945 0.1898 0.2529 Total Asset Turnover=(Sales/Total Assets) 1.8902 1.9150 2.1855 2.5424 2.7910 Profit Margin=(Net Income/Sales) 0.1053 0.0944 0.0679 0.0526 0.0559 Equity Multiplier=(total Assets/Common Equity) 2.0824 2.0969 1.3111 1.4190 1.6208

The company’s Total Asset Turnover has decreased over the years because of which Return on Equity has risen by a lessor gradient as compared to Profit Margin and Equity Multiplier. The equity multiplier shows the proportion of equity used in financing assets. It has increased over the years implying a decrease in gearing by the company. In case of IMC it is not because of injection of fresh capital by parent companies in 2013/14 when the automobile industry of Pakistan faced a downturn. The individual components of profit margin and total asset turnover needs to be analysed individually Financial Analysis of Toyota Indus Motor Company 27 to determine which factor needs the most attention and what is causing in case of profit margin creeping rise and in case of asset turnover a fall in turnover rate.

The asset turnover has decreased because of purchase of intangible assets by IMC in 2015 and 2016 causing a larger increase in assets as compared to the growth of operating income. However, there are high chances that in future the investment in intangible asset will be translated into operating income. While current assets do not have any significant change considering the inflation rate. As DuPont looks at gross asset, thus deprecation is not responsible for the growth rate of ROE. Financial Analysis of Toyota Indus Motor Company 28

Conclusion & Recommendations

Asset Management Ratios Indus motor have a very good credit and collection policies. Asset Management Ratios Indus Motor company higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. Looking at the Turnover ratios investors are more likely to invest in Indus Motor Company because of large generation of revenue from these assets. Higher Total Asset turnover of Indus Motor shows that company can operate with fewer assets than other less efficient competitors can, and so requires less debt and equity to operate. The result is of this high ratio is comparatively greater return to its shareholders. However, Total Asset Turnover is continuously falling creating hindrance in rise of ROE that is marginally rising because of equity multiplier and profit margin.

If the company manages to increase efficiency in its Asset Management especially on intangible asset acquired and fixed assets; the ROE will further rise. Causing a rise in Market to Book Ratio and Price/earnings Ratio.

Financial Analysis of Toyota Indus Motor Company 29

References

#6 Toyota Motor. (n.d.). Retrieved from https://www.forbes.com/companies/toyota- motor/

(2017, may 1). Retrieved from reuters: http://uk.reuters.com/business/quotes/overview?symbol=INDM.KA

33 Corporations Working On Autonomous Vehicles. (2016, august 11). Retrieved from https://www.cbinsights.com/blog/autonomous-driverless-vehicles- corporations-list/ best global brands 2016. (n.d.). Retrieved from http://interbrand.com/best- brands/best-global-brands/2016/ranking/toyota/

Company Overview of Indus Motor Company Limited. (n.d.). Retrieved from http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8 78212

Company Profile. (n.d.). Retrieved from Toyota Indus: http://www.toyota-indus.com

Jurevicius, O. (2017, march 20). Ford SWOT analysis 2017. Retrieved from https://www.strategicmanagementinsight.com/swot-analyses/ford-swot- analysis.html

NDUS MOTOR COMPANY LIMITED. (n.d.). Retrieved from https://www.emis.com/php/companyprofile/NM/Indus_Motor_Co_Ltd_en_2438037.html

Profile: Indus Motor Company Ltd (INDM.KA). (n.d.). Retrieved from Reuters: http://in.reuters.com/finance/stocks/companyProfile?symbol=INDM.KA

Toyota Global Newsroom. (n.d.). Retrieved from http://newsroom.toyota.co.jp/en/toyota

TOYOTA PRODUCTION SYSTEM. (n.d.). Retrieved from https://www.lean.org/lexicon/toyota-production-system

Financial Analysis of Toyota Indus Motor Company 30

Balance Sheet

Balance Sheet (Rupees in thousand) 2016 2015 2014 2013 2012 2011 Assets '000 '000 '000 '000 '000 '000 Non-Current Intangible Assets 19,291 9,727 - - - - Assets 805 Property, Plant and Equipment 4,918,98 5,183,75 6,033,26 2,742,14 3,472,90 4,225,71 6 0 4 0 6 0 Long-term Investments 5,005, 4,954,76 - - - - 4 Long-term loans & Advances 3,794 11,096 29,392 131,337 6,015 11,949 Long-Term deposits & Prepayments 9,948 9,667 9,667 9,667 - 9,222 Other financial assets - - - - 7,822 - Other Asstes ------Deferred income tax asset 198,621 5,295 - 34,647 - - Total Non-Current Assets 10,156,4 10,174,2 6,072,32 2,917,79 3,486,74 4,246,88 45 99 3 1 3 1 Current Stores and spares 153,561 178,599 141,659 153,669 178,188 189,755 Assets Stock-in-trade 7,785,24 6,150,44 4,469,46 7,883,30 7,529,57 5,690,05 5 8 0 9 1 2 Trade receivables 1,131,70 447,750 1,737,35 1,382,76 1,459,97 1,356,06 2 8 1 6 8 Receivables from financial services(loan 1,125,49 1,220,57 1,006,01 1,557,89 945,498 926,174 and advances) 0 4 0 7 Other Receivables 191,303 167,757 175,689 162,225 447,569 149,533 Marketable debt securities ------Investments 33,696,8 26,256,8 4,332,38 6,698,12 2,690,55 4,993,46 04 86 7 1 3 4 Prepayments 45,520 18,919 14,942 10,799 20,965 18,900 Accrued Return 513,355 418,829 87,354 12,155 45,355 52,586 Taxation - payment less provision - - 1,216,36 131,363 - 399,006 9 Other assets ------Cash and cash equivalents 2,737,56 5,365,38 6,857,08 4,195,30 10,771,3 8,812,19 9 8 4 2 00 9 Total Current Assets 47,380,5 40,225,1 20,038,3 22,187,6 24,088,9 22,587,7 49 50 12 01 75 37 Total Assets 57,536,9 50,399,4 26,110,6 25,105,3 27,575,7 26,834,6 94 49 35 92 18 18 Share Capital Liabilities and Equity 2016 2015 2014 2013 2012 2011 & Reserves Authorised capital 5,000,00 1,000,00 1,000,00 1,000,00 1,000,00 1,000,00 0 0 0 0 0 0 Issued, subscribed & paid up share 786,000 786,000 786,000 786,000 786,000 786,000 capital Capital Reserves 26,843,6 23,249,5 19,129,6 16,906,7 16,227,8 13,333,6 09 20 52 08 58 48 Total Equity 27,629,6 24,035,5 19,915,6 17,692,7 17,013,8 14,119,6 09 20 52 08 58 48 Non-Current Deferred tax liabilities - - 218,949 - 165,941 454,012 Liabilities Long-term Loans ------Total Non-Current Liabilities - - 218,949 - 165,941 454,012 Trade and other Payables 10,035,1 9,180,70 4,252,85 6,013,85 6,512,46 5,740,86 45 5 3 2 1 9 Advances from customers and dealers 19,127,3 16,192,9 1,723,18 1,398,69 3,823,64 6,519,66 60 18 1 8 1 9 Accrued mark-up 134 188 420 Taxation - provision less payment 744,880 990,306 - - 59,629 - Short-term Loans ------Total Current Liabilities 29,907,3 26,363,9 5,976,03 7,412,68 10,395,9 12,260,9 85 29 4 4 19 58 Total Liabilities 29,907,3 26,363,9 6,194,98 7,412,68 10,561,8 12,714,9 85 29 3 4 60 70 Contingencies & Commitment ------Total Equity and Liabilities 57,536,9 50,399,4 26,110,6 25,105,3 27,575,7 26,834,6 94 49 35 92 18 18 Additional Data 2016 2015 2014 2013 2012 2011 Net Working Capital (CA -CL) 17,473,164 13,861,221 14,062,278 14,774,917 13,693,056 10,326,779 Financial Analysis of Toyota Indus Motor Company 31

Average NWC 15667192.5 13961749.5 14418597.5 14233986.5 12009917.5 - Operating Assets 54,799,425 45,034,061 19,253,551 20,910,090 16,804,418 18,022,419 Operating Liabilities 29,907,385 26,363,929 6,194,983 7,412,684 10,561,860 12,714,970 Net Operating Assets 24,892,040 18,670,132 13,058,568 13,497,406 6,242,558 5,307,449 Average NOA 21781086 15864350 13277987 9869982 5775003.5 - Total Inventory = Stock in 7,938,806 6,329,047 4,611,119 8,036,978 7,707,759 5,879,807 Trade + Stores, Spare parts Average Inventory 7133926.5 5470083 6324048.5 7872368.5 6793783 - Average Receivables 4051478.5 6111236 5526193 7483301 9791749.5 - Average Total Assets 53968221.5 38255042 25608013.5 26340555 27205168 - Average Equity 25832564.5 21975586 18804180 17353283 15566753 - Market Stock Price (closing 1,636 1,249 537.92 311 245.08 220 date) Market Value of Equity 128589600000 98171400000 42280512000 24444600000 19263288000 17292000000 Lease payments ------Loan repayments (current ------portion of long term debt) Net Financial Obligation (NFO) 20,714,481 16,260,069 3,654,275 6,998,324 - 181,575 - 578,860 Net Financial Expense (NFE) 3,087,169 2,854,914 1,075,062 1,007,136 1,714,767 1,430,763 LEV 0.74972038 0.67650165 0.18348759 0.39554849 - 0.01067218 - 0.04099677 Net Borrowing Cost NBC 0.14903434 0.175578222 0.294192966 0.143911028 -9.44384965 -2.47169091 Spread ROE computed 41.46% 37.90% 19.45% 18.98% 25.29% 19.43% Number of Shares 78,600,000 78,600,000 78,600,000 78,600,000 78,600,000 78,600,000 Book Value per Share 351.52 305.80 253.38 225.10 216.46 179.64 Income Statement

Income Statement (Rupees in thousand) 2016 2015 2014 2013 2012 2011

'000 '000 '000 '000 '000 '000

Net Sales 108,758,668 96,516,322 57,063,622 63,829,075 76,962,642 61,702,677

Cost of Sales 91,027,369 82,272,092 51,270,040 57,972,038 70,400,788 57,613,542

Gross Profit 17,731,299 14,244,230 5,793,582 5,857,037 6,561,854 4,089,135

Distribution Cost 1,060,891 996,017 793,509 814,228 820,339 690,130

Administrative Expenses 930,800 798,696 634,628 643,978 627,673 462,517

Other Expenses 143,840 119,451 424,010 436,192 516,342 355,796

2,135,531 1,914,164 1,852,147 1,894,398 1,964,354 1,508,443

Operating Profit 15,595,768 12,330,066 3,941,435 3,962,639 4,597,500 2,580,692

Workers’ Profit Participation Fund and 1,285,491 1,052,411 Workers’ Welfare Fund

Net Earnings 14,310,277 11,277,655 3,941,435 3,962,639 4,597,500 2,580,692

Other Income 3,164,440 2,906,797 1,113,316 1,037,840 1,775,748 1,507,878

Profit from Operation (EBIT) 17,474,717 14,184,452 5,054,751 5,000,479 6,373,248 4,088,570

Finance Cost (Interest Expense) 77,271 51,883 38,254 30,704 60,981 77,115

Share of (loss)/profit from associate

Profit Before Taxation (EBT) 17,397,446 14,132,569 5,016,497 4,969,775 6,312,267 4,011,455

Taxation 5,942,506 5,022,318 1,143,045 1,612,230 2,009,552 1,268,071

Profit After Taxation (NI after Tax) 11,454,940 9,110,251 3,873,452 3,357,545 4,302,715 2,743,384

Earnings Per Share 145.74 115.91 49.28 42.72 54.74 34.9

Additional Information Financial Analysis of Toyota Indus Motor Company 32

2016 2015 2014 2013 2012 2011

Dividend Per Share 100 80 29.5 25 32 15

Depreciation 21,946 24,804 8,420,087 7,599,412 6,633,030

Amortization 6,037 2,122 37,967 37,548 36,241

EBITDA 17,502,700 14,211,378 13,512,805 12,637,439 13,042,519 4,088,570

NOPAT 11505817.28 9143696.239 3902989.55 3378288.406 4344282.295 2796121.986

Tax Rate 0.34157347 0.355371907 0.227857208 0.324407041 0.318356622 0.316112483

Cash flow Statement

Financial highlights of Cash Flow Statement (Rupees in 2016 2015 2014 2013 2012 2011 thousand)

Net Cash generated/(used in) from operating activities 11,412,770 28,750,249 5,590,451 148,658 927,978 701,831

Net Cash generated /(used in) from investing activities 1,496,573 - 5,995,315 - 1,268,131 - 4,078,785 2,440,528 - 6,471,556

Net Cash generated /(used in) from financing activities - 7,894,662 - 4,889,130 - 1,660,538 - 2,645,871 - 1,409,405 - 1,174,056

Net Increase / (decrease) in cash and cash equivalents 5,014,681 17,865,804 2,661,782 - 6,575,998 1,959,101 - 6,943,781

Cash and Cash Equivalents at the beginning of the year 24,722,888 6,857,084 4,195,302 10,771,300 8,812,199 15,755,980

Cash and Cash Equivalents at the end of the Year 29,737,569 24,722,888 6,857,084 4,195,302 10,771,300 8,812,199

DuPont

Ratios

Financial Ratios Formula 2016 2015 2014 2013 2012

Current Ratio CA / CL 1.58424 1.52576 3.35311 2.99319 2.31716 Quick Ratio (CA - Inventories)/CL 1.54661 1.47947 3.18477 2.78303 2.22621

(Cash + Marketable Securities+ Accounts Acid-test Ratio 0.12938 0.22050 1.43815 0.75250 1.17655 Receivable)/Current Liabilities Inventory TO CGS / Avg Inventory 12.75979 15.04037 8.10715 7.36399 10.36253 Liquidity Ratios Days Sales in Inventory 365/ Inventory TO 28.60550 24.26801 45.02196 49.56553 35.22305

Receivables TO Net Sales / Average Account Receivables 26.84419 15.79326 10.32603 8.52953 7.85995 Days Sales in Receivables 365/ Receivables TO 13.59698 23.11113 35.34757 42.79249 46.43797 Days Inventory Outstanding + Days Sales Operating Cycle 42.20248 47.37914 80.36953 92.35801 81.66102 Outstanding

Return on Sales NI / Sales 10.53% 9.44% 6.79% 5.26% 5.59% Financial Analysis of Toyota Indus Motor Company 33

Gross Profit Margin GP / Sales 16.30% 14.76% 10.15% 9.18% 8.53% Operating Profit Margin EBT / Sales 16.00% 14.64% 8.79% 7.79% 8.20% EBIT to Sales EBIT / Sales 16.07% 14.70% 8.86% 7.83% 8.28% EBITDA to Sales EBITDA / Sales 16.09% 14.72% 23.68% 19.80% 16.95% Profitability Ratios Return on Assets (ROA) NI / Avg TA 21.23% 23.81% 15.13% 12.75% 15.82% Return on Equity (ROE) NI / Avg Equity 44.34% 41.46% 20.60% 19.35% 27.64% Return on net operating NOPAT / Avg NOA 52.82% 57.64% 29.39% 34.23% 75.23% Assets (RNOA) Return on Capital EBIT(1 − Tax Rate)\Invested Capital 41.64% 38.04% 19.60% 19.09% 25.53%

Liabilities to Equity ratio TL / Equity 1.08244 1.09687 0.31106 0.41897 0.62078 Total Leverage Total Debt / EBITDA 1.70873 1.85513 0.45845 0.58657 0.80980 Solvency Ratios 226.5105 273.9120 353.2390 411.5893 213.8784 EBITDA Coverage Ratio EBITDA / Interest Expense 9 3 1 4 0 226.1484 273.3930 132.1365 162.8608 104.5120 Times Interest Earned EBIT / Interest Expense 5 6 3 3 3

Sales to Asset ratio Sales / TA 1.89024 1.91503 2.18546 2.54244 2.79096 Asset (turnover) Utilization & Sales to Avg NWC Sales / Avg NWC 6.94181 6.91291 3.95764 4.48427 6.40826 Efficiency Sales to Fixed Assets Ratios Sales / Fixed Assets 22.10998 18.61902 9.45817 23.27710 22.16088 turnover

Price Earning Ratio Stock Price / EPS 11.22547 10.77560 10.91558 7.27996 4.47716 Market Value Dividend Yield Dividend Per share / Stock Price 0.06112 0.06405 0.05484 0.08039 0.13057 Ratios Market to Book Value Stock Price / Book Value per Share 4.65405 4.08443 2.12298 1.38162 1.13221

Financial Analysis of Toyota Indus Motor Company 34

Benchmark

Financial Ratios Company 2016 2015 2014 2013 2012 Current Ratio Toyota Indus Motors 1.58 1.53 3.35 2.99 2.32 Ghandhara Nissan Motors Limited 2.79 2.86 4.47 2.54 0.60 Pak Suzuki 2.55 2.53 2.98 3.08 2.32 Honda Altas 1.91 1.76 2.56 2.24 1.98 Average 2.21 2.17 3.34 2.71 1.80 Quick Ratio Toyota Indus Motors 1.55 1.48 3.18 2.78 2.23 Ghandhara Nissan Motors Limited 1.25 1.93 1.16 1.00 0.24 Pak Suzuki 1.35 0.46 0.62 0.49 0.27 Honda Altas 1.19 1.12 1.33 1.20 0.99 Average 1.34 1.25 1.57 1.37 0.93 Inventory TO Toyota Indus Motors 12.76 15.04 8.11 7.36 10.36 Ghandhara Nissan Motors Limited 3.10 4.74 4.68 5.25 4.05 Pak Suzuki 5.17 3.83 4.46 4.75 4.67 Honda Altas 7.97 9.16 6.86 6.83 6.68 Average 7.25 8.19 6.03 6.05 6.44 Liquidity Ratios Days Sales in Inventory Toyota Indus Motors 28.61 24.27 45.02 49.57 35.22 Ghandhara Nissan Motors Limited 62.813 59.667 90.389 104.233 169.516 Pak Suzuki 70.54 95.34 81.81 76.76 78.23 Honda Altas 56.00 47.00 66.00 60.00 58.00 Average 54.49 56.57 70.81 72.64 85.24 Receivables TO Toyota Indus Motors 26.84 15.79 10.33 8.53 7.86 Ghandhara Nissan Motors Limited 14.21 22.81 26.05 43.09 43.07 Pak Suzuki 58.03 45.95 64.99 128.54 187.15 Honda Altas 269.10 602.92 67.10 36.10 58.64 Average 92.05 171.87 42.12 54.06 74.18 Days Sales in Receivables Toyota Indus Motors 13.60 23.11 35.35 42.79 46.44 Ghandhara Nissan Motors Limited 25.68 16.00 14.01 8.47 8.47 Pak Suzuki 62.90 79.40 56.20 28.40 19.50 Honda Altas 3.00 3.60 5.70 5.00 3.60 Average 26.29 30.53 27.81 21.17 19.50 Return on Sales Toyota Indus Motors 0.1053 0.0944 0.0679 0.0526 0.0559 Ghandhara Nissan Motors Limited 0.1091 0.0934 0.0664 0.0055 -0.0619 Pak Suzuki Honda Altas 0.0890 0.0840 0.0270 0.0080 -0.0320 Average 0.1012 0.0906 0.0538 0.0220 -0.0127 Profitability Ratios Gross Profit Margin Toyota Indus Motors 0.163 0.148 0.102 0.092 0.085 Ghandhara Nissan Motors Limited 0.218 0.208 0.180 0.122 0.094 Pak Suzuki 0.136 0.078 0.064 0.040 0.036 Honda Altas 0.151 0.126 0.073 0.048 -0.027 Average 0.167 0.140 0.104 0.075 0.047 Operating Profit Margin Toyota Indus Motors 0.160 0.146 0.088 0.078 0.082 Financial Analysis of Toyota Indus Motor Company 35

Ghandhara Nissan Motors Limited 0.166 0.145 0.103 0.010 -0.070 Pak Suzuki 0.103 0.049 0.046 0.026 0.026 Honda Altas 0.129 0.100 0.055 0.024 -0.021 Average 0.1396 0.1100 0.0729 0.0342 0.0042 EBIT to Sales Toyota Indus Motors 0.1607 0.1470 0.0886 0.0783 0.0828 Ghandhara Nissan Motors Limited 0.1700 0.1604 0.1221 0.0531 0.0187 Pak Suzuki Honda Altas 0.1290 0.1000 0.0550 0.0240 -0.0210 Average 0.1532 0.1358 0.0886 0.0518 0.0268 EBITDA to Sales Toyota Indus Motors 0.1609 0.1472 0.2368 0.1980 0.1695 Ghandhara Nissan Motors Limited 0.1874 0.1743 0.1221 0.0531 0.0187 Pak Suzuki Honda Altas 0.1410 0.1190 0.0720 0.0430 0.0190 Average 0.1631 0.1468 0.1436 0.0980 0.0690 Return on Assets (ROA) Toyota Indus Motors 0.2123 0.2381 0.1513 0.1275 0.1582 Ghandhara Nissan Motors Limited 0.1428 0.1453 0.0615 0.0044 -0.0311 Pak Suzuki 0.1776 0.0737 0.0819 0.0438 0.0373 Honda Altas 0.2360 0.2410 0.0782 0.0199 -0.0531 Average 0.1922 0.1745 0.0932 0.0489 0.0278 Return on Equity (ROE) Toyota Indus Motors 0.4434 0.4146 0.2060 0.1935 0.2764 Ghandhara Nissan Motors Limited 0.3800 0.4850 0.2387 0.0165 -0.1356 Pak Suzuki 0.2661 0.1042 0.1106 0.0629 0.0533 Honda Altas 0.5445 0.8421 0.5680 0.1928 -0.3772 Average 0.4085 0.4615 0.2808 0.1164 -0.0458 Return on net operating Asset Toyota Indus Motors 0.5282 0.5764 0.2939 0.3423 0.7523 Ghandhara Nissan Motors Limited 0.2321 0.2084 0.0906 0.6942 0.0514 Pak Suzuki Honda Altas 0.3620 0.3100 0.1040 0.0320 0.0340 Average 0.37 0.36 0.16 0.36 0.28 Liabilities to Equity ratio Toyota Indus Motors 1.08 1.10 0.31 0.42 0.62 Ghandhara Nissan Motors Limited 0.91 0.98 0.93 1.38 6.75 Pak Suzuki Honda Altas 0.85 1.10 1.64 3.62 2.71 Average 0.95 1.06 0.96 1.81 3.36 Total Leverage Toyota Indus Motors 1.71 1.86 0.46 0.59 0.81 Ghandhara Nissan Motors Limited 1.56 1.32 2.40 8.87 157.80 Solvency Ratios Pak Suzuki 1.52 1.47 1.35 1.35 1.52 Honda Altas 2.04 2.72 5.15 10.89 8.28 Average 1.71 1.84 2.34 5.42 42.10 EBITDA Coverage Ratio Toyota Indus Motors 226.51 273.91 353.24 411.59 213.88 Ghandhara Nissan Motors Limited 50.86 11.00 6.37 1.22 0.24 Pak Suzuki Honda Altas 810.39 240.48 74.11 6.89 2.13 Average 362.59 175.13 144.57 139.90 72.08 Financial Analysis of Toyota Indus Motor Company 36

Times Interest Earned Toyota Indus Motors 226.15 273.39 132.14 162.86 104.51 Ghandhara Nissan Motors Limited 46.140 10.123 6.370 1.220 0.237 Pak Suzuki Honda Altas 741.79 202.81 56.08 3.75 - 2.28 Average 338.03 162.11 64.86 55.94 34.16 Sales to Asset ratio (turnover) Toyota Indus Motors 1.89 1.92 2.19 2.54 2.79 Ghandhara Nissan Motors Limited 1.23 1.52 0.76 0.84 0.57 Pak Suzuki Honda Altas 2.66 2.88 2.85 2.46 1.66 Average 1.93 2.11 1.93 1.95 1.67 Sales to Avg NWC Toyota Indus Motors 6.94 6.91 3.96 4.48 6.41 Ghandhara Nissan Motors Limited 8.83 10.71 21.55 -1.23 -0.93 Asset Utilization & Pak Suzuki Efficiency Ratios Honda Altas 13.13 99.03 - 18.54 - 8.90 - 4.58 Average 9.63 38.88 2.32 -1.88 0.30 Sales to Fixed Assets turnover Toyota Indus Motors 22.11 18.62 9.46 23.28 22.16 Ghandhara Nissan Motors Limited 2.70 3.11 1.49 1.40 1.00 Pak Suzuki Honda Altas 15.96 13.38 13.63 9.02 5.10 Average 13.59 11.70 8.19 11.23 9.42 Price Earning Ratio Toyota Indus Motors 11.23 10.78 10.92 7.28 4.48 Ghandhara Nissan Motors Limited Pak Suzuki Honda Altas 10.12 8.28 7.33 17.06 - 2.97 Average 10.67 9.53 9.12 12.17 0.75 Dividend Yield Toyota Indus Motors 0.06 0.06 0.05 0.08 0.13 Ghandhara Nissan Motors Limited Market Value Ratios Pak Suzuki Honda Altas 0.03 0.03 0.05 0.01 0.00 Average 3.59 3.21 3.08 4.09 0.29 Market to Book Value Toyota Indus Motors 4.65 4.08 2.12 1.38 1.13 Ghandhara Nissan Motors Limited Pak Suzuki Honda Altas 4.53 5.10 3.28 3.03 1.39 Average 4.26 4.13 2.83 2.83 0.94