Indus Motor Company is expected to report a decline in gross margin for the September 2026 quarter despite stronger vehicle sales, as a higher share of lower-margin Yaris models weighs on profitability, according to Insight Securities.
The company’s gross margin is projected to fall to 12.9% in the first quarter of FY27, compared with 17.1% in the same period last year. Although higher sales volumes are expected to support revenue growth, the shift in product mix is likely to limit earnings gains.
Revenue is forecast to increase 21% year-on-year to approximately Rs74.9 billion, while unit sales are expected to rise around 34%. However, profit after tax is projected at Rs6.8 billion, translating into earnings per share (EPS) of Rs87.1, representing a modest 2% increase from a year earlier.
Higher Sales Volumes Fail to Offset Margin Pressure
Indus Motor’s projected performance highlights the challenge of converting stronger vehicle demand into proportionate profit growth.
The increase in sales volumes is expected to support the company’s top line, but the greater contribution from Yaris models is anticipated to put pressure on overall gross margins. As a result, revenue growth is likely to outpace earnings growth during the quarter.
The projected decline in gross margin from 17.1% to 12.9% indicates that the company may generate lower gross profit relative to revenue despite selling more vehicles.
Passenger Car Demand Supports Sales Growth
Pakistan’s passenger car market has shown signs of recovery, supported by improving economic conditions and lower interest rates.
Industry-wide passenger car sales increased 43% year-on-year during the first quarter of FY27, providing a favourable backdrop for Indus Motor’s volume growth.
However, demand trends across vehicle categories have remained uneven. Jeeps and pickups experienced weaker offtake as buyers awaited greater clarity on the next automobile policy. Tractor sales, meanwhile, recovered from a low base.
These differences suggest that the recovery in the automotive sector is not uniform across all vehicle segments.
Higher Other Income Provides Earnings Support
Indus Motor’s other income is projected to rise 37% year-on-year to approximately Rs3.9 billion, supported by higher cash balances.
The increase in other income is expected to cushion the impact of weaker gross margins and help sustain earnings growth during the quarter.
On a sequential basis, profit after tax is forecast to increase 12% compared with the June quarter, indicating an improvement in quarterly earnings despite the year-on-year pressure on margins.
The company is also expected to announce a cash dividend of Rs52 per share alongside its results.
Indus Motor Earnings Contrast With Broader Auto Sector Trend
Across the broader automobile companies covered in the sector analysis, combined profit is expected to decline by approximately 7% year-on-year.
The anticipated decline is mainly attributed to weaker results at Sazgar, where vehicle volumes and margins came under pressure following the expiry of tax incentives.
Against this backdrop, Indus Motor’s projected 2% annual earnings growth represents a relatively stable performance. Stronger sales, higher other income and an expected sequential improvement in profit are likely to provide support, although the decline in gross margins remains a key concern.
The company’s results will therefore highlight the balance between recovering vehicle demand, product mix and profitability in Pakistan’s automotive industry.