Ghandhara Automobile Ltd. (GAL) is known for assembling and selling commercial vehicles and passenger cars in Pakistan. The company has been the talking point among traders and investors this year as its business continues to improve.
The share price of the company has increased 200% in a short period of three months. Since last year, the stock’s returns stand at 410%. What exactly has brought these returns in a high-interest rate environment that is not conducive to this business?
Let us first take a look at what Ghandhara Automobile Ltd. (GAL) does. The company is involved in the local assembly of JAC trucks and Chery SUVs. It also carries out CBU imports – Completely Build Units of Dongfeng and Renault. For Ghandhara Industries Ltd. (GHNI), the company also does toll manufacturing under the ISUZU brand.
The company has an annual capacity of capacity of 4800 commercial vehicle units and 6000 passenger car units.
The slow and steady rise of the stock last year can be attributed to the following:
The government of Pakistan enforced the 100% axle load control regime on Nov 15th, 2023. This has resulted in limiting heavy vehicles to only carry 50-70% of their previous capacity. As a result, more vehicles are needed to move the same goods across the country, increasing the sale of trucks.
While interest rates continue to stay at the same level as late last year, inflation has cooled down. With economic activity picking up, road freight transport(responsible for 90% of all freight transport) was also likely to see a boost. In anticipation of this, many expected truck sales to go up.
The above two factors were priced in by shrewd investors by late last year. But it is the most recent financial result of the company that has everyone talking about the company.
GAL reported a 61% QoQ increase in its sales volumes. While the overall revenue declined 55% in the nine months ending 31/03/2024, it was just a reflection of poor economic conditions and the headwinds that the company is just coming out of.
Investors clearly believe the quarterly performance is an indicator of better things to come. And that has launched the stock price to new highs, with the stock doubling in less than two months.
The optimism is likely to continue into the future. And the reason for this is the launch of GAL’s hybrid vehicle.
Despite losing market share to SAZEW’s Haval HEV, GAL plans to launch a hybrid version of the Chery Tiggo in the latter half of this year, aiming to regain its market position. The introduction of Chery Tiggo SUVs in FY22 was well-received so investors are hopeful the company can repeat the performance with the hybrid as well.
GAL is also expanding its 3S dealership network, currently totalling 26 locations, to enhance its market reach and customer service.
The answer to the above question lies not only in the upcoming growth opportunities but also in the risks in the near term.
The company has priced in a lot of the good news. As more players try to take market share away from their competitors, the competition will eventually drive margins lower. The first to create an impression is likely to take the lion’s share of the profits in the early days of hybrid vehicles.
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Dear sir ,,
gal daily hitting low today hit 192 at this time 10.46 morning .. date 04.10 2024 why going down rate daily i want to asked what is the reason ,, my email address saleem_hashmi512@hotmail.com can you answer me . thanks sir