Hinopak Motors

Hinopak
Motors

Page 1
 Hinopak Motors

Contents
ACKNOWLEDGEMENT.................................................................................................4
COMPANY PROFILE.....................................................................................................5
Calculations of Year 2006...........................................................................................7
Short-term Solvency Ratio.......................................................................................8
Long-term Solvency Ratio.......................................................................................9
Assets Utilization Ratio..........................................................................................10
Profitability Ratios.................................................................................................11
Calculations of Year 2007.........................................................................................12
Short-term Solvency Ratio.....................................................................................13
Long-term Solvency Ratio.....................................................................................14
Assets Utilization Ratio..........................................................................................15
Profitability Ratios.................................................................................................16
Calculations of Year 2009.........................................................................................17
Short-term Solvency Ratio.....................................................................................18
Long-term Solvency Ratio.....................................................................................19
Assets Utilization Ratio..........................................................................................20
Profitability Ratios.................................................................................................21
Market Ratios........................................................................................................22
Cross Sectional Analysis Year 2009..........................................................................23
Short-term Solvency Ratios...................................................................................24
Long-term Solvency Ratios....................................................................................26
Assets Utilization Ratios........................................................................................28
Profitability Ratios.................................................................................................31
Time Series Analysis Year 2006, 2007, 2009............................................................34
Graphical Representation of Time Series Analysis....................................................41
Short Term Solvency Ratios..................................................................................42
Long term Solvency Ratios....................................................................................43
Asset Utilization Ratios..........................................................................................44
Profitability Ratios.................................................................................................45

Page 2
 Hinopak Motors

Financial Statements................................................................................................46
Calculations of IGR & SGR Year 2009.......................................................................47
Performa Financial Statements on the Basis of SGR.................................................49
Overall Analysis and Recommendations...................................................................50
Overall Analysis.....................................................................................................51
Recommendations.................................................................................................52
Recommendations

Page 3
 Hinopak Motors

IN THE NAME OF ALLAH, THE MOST BENEFICIAL, THE MOST

MERCIFUL

ACKNOWLEDGEMENT
I am enormously grateful to Almighty Allah; by the Grace of Whom I have been able to present
this informative report.

Page 4
 Hinopak Motors

COMPANY PROFILE
Hinopak Motors Limited assembles, manufactures and markets world renowned
Hino diesel trucks and buses in Pakistan. The Company has held the top position in
the domestic market for medium and heavy-duty vehicles for 17 consecutive years
and is highly acclaimed for quality and technological excellence Backed by Hino's
expertise Hinopak has achieved standard of quality and excellence that rival the
best in the region. With over 39,000 vehicles on road, Hinopak has gained 65%
market share making it the largest manufacturer in medium and heavy-duty truck
and bus industry in Pakistan. Hinopak product range has been designed and built in
Hino's traditions of automotive excellence to be the leader in its category and the
main emphasis has been given to passengers' safety & comfort.

THE COMPANY
Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim
Group of UAE and PACO Pakistan formed Hinopak Motors Limited in 1986.

In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority
shareholding in the company after disinvestments by the other two founding
sponsors. This decision to invest in Hinopak at a time when the country's economy
was passing through a depression and the sale of commercial vehicles was at an all
time low reflects the confidence our Principals have in our company and their
commitment to the Pakistani market. Hinopak is the trusted market leader with over
65% share in the Pakistani Truck and Bus industry. Hinopak a vital contributor in
saving of foreign exchange is also providing jobs and plays a pivotal role for the
development of the local industry through its progressive manufacturing. By
continuing to move forward and staying alert to the ever-changing market & social
needs, Hinopak will continue to be a successful and respected corporate citizen of
Pakistan, reflecting their commitment and belief in the Hinopak corporate
philosophy to "contribute to the development of a more prosperous and comfortable
society by providing the world with a new set of values".

VISION

“Total Customer Satisfaction, a set vision for the company. In pursuit new concepts
have been introduced such as a mobile workshops, 3S/2S dealership facilities,
training and free service camps for the vehicle owners and drivers”.

MISSION

Page 5
 Hinopak Motors

"The mission of Hinopak Motors Limited is to

provide the society with safe, economical,
comfortable and environment friendly means
of transportation by manufacturing and
supplying commercial vehicles and services".

Environment management System

Hinopak conducted its Initial Environmental Review (IER) in the year 2001 to
ascertain its capability for adopting ISO14001 standard. In a very short span of time
Hinopak management adopted ISO14001 management system and became the first
automobile company in Pakistan to get this qualification. Hinopak in its mission to
promote activities that reduce environmental impacts and as directive from the
principal Hino Motors Japan acquired ISO 14001:1996 in 2001. In 2005, we
successfully upgraded our ISO 14001:1996 Standard to new ISO 14001:2004
Standard and again became the first automobile company in Pakistan as well as in
Hino Group to achieve this qualification worldwide.

Environmental Audits

Regular audits are conducted to ensure that our EMS is

in line with ISO 14001:2004 international standard and
is properly implemented and maintained. Top
management reviews results of audits on regular basis
to verify that the Hinopak EMS spiral up continually.
Two days EMS Internal Audit Training was held on 6-7
June 2007 to develop team of auditors, whose expertise
would be utilized for the effective execution of audits.
During Sept. 2007, recertification audit was conducted
in which no major or minor nonconformity was registered.

Training and Awareness

At Hinopak, various educational activities are organized to give environmental

awareness to employees, suppliers and customers. We make it a point that our

Page 6
 Hinopak Motors

people develop greater consciousness and sense of responsibility towards the

environment. Trainings related to Operational Control, Energy Conservations and
Emergency Response are on our regular agenda. Every new employee whether
appointed in management or worker cadre is given orientation on EMS.

Country wide free services and tune-up camps are regularly organized to educate
the general transport customers on the need to maintain healthy environment. Such
activity demonstrates our commitment to a better environment and road safety. We
organize technical training program free of cost free of drivers and mechanics.
Topics range from Road Safety to Vehicle Maintenance, etc. to inculcate
consciousness for safe, optimum, pollution free performance of our products.

Calculations of Year
2006

Page 7
 Hinopak Motors

Short-term Solvency Ratio

Current ratio = Current assets / Current Liabilities

=
= 3259538/2343081

1.39 : 1

Quick ratio = (Current assets – Inventory) / Current

= Liabilities
=
(3259538 – 2381286) / 2343081

0.4 : 1

Cash ratio = Cash / Current Liabilities

=
= 118297/ 2342081

0.05 : 1

Working Capital = (Current assets – Current Liabilities)

=
= (3259538 – 2342081)

917457

Page 8
 Hinopak Motors

Long-term Solvency Ratio

Debt ratio = Total Liabilities / Total assets

=
= 2426442/4139836

0.6 : 1

Debt to equity ratio = Total Liabilities / Total share holders’ equity

=
2426442/1422853 = 1.2 : 1

Time interest earned = Operating profit / Finance Cost

=
= 560179 / 48416

11.57 : 1

Page 9
 Hinopak Motors

Assets Utilization Ratio

Account receivable turnover = Net Cr Sales / Avg. A/R

=
= 6392282 / 503226

12.7 : 1

Avg. Collection period = (360 / (A/R Turnover))

=
= 360 / 12.7

28.34 Days

Inventory turnover = Cost of Sales / Avg. Inventory

=
= 5557702/ 2381286

2.33 : 1

Fixed asset turnover = Net Sales / Fixed asset

=
= 6392282 / 865244

7.38 : 1

Total asset turnover = Net Sales / Total asset

=
= 6392282 / 4139836

1.5 : 1

Page 10
 Hinopak Motors

Profitability Ratios

= (Gross Profit / Net Sales) x 100

Gross Profit margin =
= (834580 / 6392282) x 100

13.05 %

Operating Profit margin = (Operating Profit / Net Sales ) x 100

=
= (560179 / 6392282) x 100

8.76 %

Net Profit margin = (Net Profit / (Net Sales ) x 100

=
= (323881 / 6392282) x 100

5%

Return on assets = (Net Profit / (Total Asset )) x 100

=
= (323881 / 4139836) x 100

7.82 %

Return on equity = (Net Profit / T.S.H.E) x 100

=
= (323881 / 1422853) x 100

22.76 %

Page 11
 Hinopak Motors

Calculations of Year
2007

Page 12
 Hinopak Motors

Short-term Solvency Ratio

Current ratio = Current assets / Current Liabilities

=
= 4008095/2672702

1.5

Quick ratio = (Current assets – Inventory) / Current

= Liabilities
=
(4008095 – 2533159) / 2672702

0.6:1

Cash ratio = Cash / Current Liabilities

=
= (260915) / 2672702

0.097:1

Working Capital = (Current assets – Current Liabilities)

=
= (4034443 – 3018002)

1335393 Lacks

Page 13
 Hinopak Motors

Long-term Solvency Ratio

Debt ratio = Total Liabilities / Total assets

=
= 2738296/4911531

0.6:1

Debt to equity ratio = Total Liabilities / Trade Capital

=
= 2738296/5007046

1.45:1

Time interest earned = Operating profit / Finance Cost

=
= 967778 / 63168

15.32:1

Page 14
 Hinopak Motors

Assets Utilization Ratio

Account receivable turnover = (Net Cr Sales / (Avg. A/R)

=
= 7826780 / 816386

9.6:1

Avg. Collection period = 360 / (A/R Turnover)

=
= 360 / 9.6

37 Days

Inventory turnover = Cost of Sales / Avg. Inventory

=
= 6439143 / 2533159

2.6:1 Times.

Fixed asset turnover = Net Sales / Fixed asset

=
= 7826780 / 890313

8.8:1 Times.

Total asset turnover = Net Sales / Total asset

=
= 7826780 / 4911531

1.6 Times.

Page 15
 Hinopak Motors

Profitability Ratios

Gross Profit margin = (Gross Profit / Net Sales ) x 100

=
= (1387637 / 7826780) x 100

18 %

Operating Profit margin = (Operating Profit / Net Sales) x 100

=
= (967778 / 7826780) x 100

13.36 %

Net Profit margin = (Net Profit / Net Sales ) x 100

=
= (590047 / 7826780) x 100

7.53 %

Return on assets = (Net Profit / Total Asset ) x 100

=
= (590047 / 4911531) x 100

12 %

Return on equity = (Net Profit / Trade Capital ) x 100

=
= (590047 / 1888558) x 100

31.24 %

Page 16
 Hinopak Motors

Calculations of Year
2009

Page 17
 Hinopak Motors

Short-term Solvency Ratio

Current ratio = Current assets / Current Liabilities

=
= 4034443/3018002

1.331

Quick ratio = (Current assets – Inventory) / Current

= Liabilities
=
(4034443 – 2398605) / 3018002

0.54:1

Cash ratio = (Cash) / Current Liabilities

=
= (70206) / 3018002

0.02:1

Working Capital = (Current assets – Current Liabilities)

=
= (4034443 – 3018002)

7052445 Lacks

Page 18
 Hinopak Motors

Long-term Solvency Ratio

Debt ratio = Total Liabilities / Total assets

=
= 3061501/5007046

0.61:1

Debt to equity ratio = Total Liabilities / Trade Capital

=
= 3061501/5007046

1.835:1

Time interest earned = Operating profit / Finance Cost

=
= 115828 / 678526

1.17:1

Page 19
 Hinopak Motors

Assets Utilization Ratio

Account receivable turnover = Net Cr Sales / Avg. A/R

=
= 12,151,021 / 1135332

11:1

Avg. Collection period = (360 / (A/R Turnover)

=
= 360 / 11

33 Days

Inventory turnover = Cost of Sales / Avg. Inventory

=
= 10899778 / 2398605

4.54:1 Times.

Fixed asset turnover = (Net Sales / (Fixed asset)

=
= 15,151,021 / 948535

13:1 Times.

Total asset turnover = (Net Sales / (Total asset)

=
= 15,151,021 / 5007046

2.42 Times.

Page 20
 Hinopak Motors

Profitability Ratios

Gross Profit margin = (Gross Profit / Net Sales )x 100

=
= (1251,243 / 12151021) x 100

10.29 %

Operating Profit margin = (Operating Profit / Net Sales ) x 100

=
= (794354 / 12151021) x 100

7.29 %

Net Profit margin = (Net Profit / Net Sales ) x 100

=
= (69,923 / 12151021) x 100

0.57 %

Return on assets = (Net Profit / Total Asset ) x 100

=
= (69,923 / 5007046) x 100

1.39 %

Return on equity = (Net Profit / Trade Capital ) x 100

=
= (3018002 / 124006) x 100

4.19 %

Page 21
 Hinopak Motors

Market Ratios

Earnings Per Share = NPAT / No. of Share Issued

=
= (69923 / 12398)

5.64 Rupees

Dividend Payout Rate = Total Dividend / NPAT

=
= (21704.992 / 69923)

0.3104

Retention Rate = 1 - Dividend Payout Rate

=
= 1 - 0.3104

0.6896

Dividend per Share = Dividend CS / No. of Share Issued

=
= (21704.0992 / 12397.7)

1.75

Page 22
 Hinopak Motors

Cross Sectional
Analysis Year 2009

Page 23
 Hinopak Motors

Short-term Solvency Ratios

Current ratio
Current ratio measures a firm’s ability to meet its short term obligation. It shows the
relationship between current assets and current liabilities.

Hinopak has current ratio of 1.33times. It means the company’s current assets are
1.33times more than current liabilities. If we compare the results of company with
the industry results, the company is showing its worst position.

Quick ratio
Quick ratio measures a firm’s ability to meet its short term obligations. The quick
ratio is more conservative than the current ratio because it excludes inventory and
other current assets, which are more difficult to turn into cash. Therefore, a higher
ratio means a more liquid current position.

It shows the relationship between current assets, inventory and current liabilities. In
this, company quick ratio is 0.54 Times, if we compare the result with the industry’s
result, Hinopak is showing worse position.

Page 24
 Hinopak Motors

Cash ratio

Cash ratio measures a firm’s ability to meet its short term obligations. It shows the
relationship between Cash and Current liabilities. In this, company cash ratio is 0.02
times means that company cash balance is 0.02 times more than that of its current
liabilities. It is the relationship between cash and current liabilities. Hinopak has
0.02 times of cash ratio and showing worse position against industry’s result.

Working Capital
Working Capital measures firm’s ability to meet its short-term obligations. If a
company's current assets do not exceed its current liabilities, then it may run into
trouble paying back creditors in the short term. It shows the relationship between
current assets and current liabilities. It is the difference between current assets and
current liabilities. Hinopak has 70 Lacks and 52 thousand of working capital and
shows better result against the industry result.

Page 25
 Hinopak Motors

Long-term Solvency Ratios

Debt ratio
Debt ratio measures firm’s ability to meet its long-term obligations. It is the
relationship between total liabilities and total assets. In this company, debt ratio is
0.61times means company can pay its total liabilities 0.61 times from its total
assets. If we compare the result against industry’s result, Hinopak is showing worse
position.

Debt to equity ratio

Debt to equity measures firm’s ability to meet its long-term obligations and
commitments. It is the relationship between total liabilities and Trade Capital.
Hinopak has debt to equity ratio of 1.9 times from its total shareholder’s equity. If
we compare the results of company and industry, company is showing worse
position.

Page 26
 Hinopak Motors

Time interest earned

Time interest earned measures the firm’s ability to meet its long-term obligations. It
is the relationship between Operating profit and Finance Cost. Hinopak has a Time
interest earned of 1.17 times means that it can pay its interest-expanses 1.17times
from its operating profit. If we compare Hinopak performance with industry Hinopak
is showing worse position.

Page 27
 Hinopak Motors

Assets Utilization Ratios

Account receivable turnover
Account receivable turnover indicates that how many times a company converts its
receivable into cash during a year. In this company A/C turnover is 11 times of its
receivable into cash. It is the relation between net Credit sales and A/C receivable.
Comparing with industry, Hinopak is showing worse Position.

Avg. Collection period

Avg. Collection period indicates that after how many days a company converts it’s
receivable into cash. It is the relation between number of days in a year and
account receivable turnover. In this company Avg. Collection period is 33 days
means company converts its receivable into cash in 33 days. Against industry,
Hinopak is showing worse Position.

Page 28
 Hinopak Motors

Inventory Turnover
Inventory turnover indicates that how many times a company converts its inventory
into cash or sales. It is the relationship between cost of sales and Avg. inventory.
Hinopak converts 4.54 times of its inventory into cash or sales during a year. This
shows worse position against industry.

Fixed Asset Turnover

This ratio is a rough measure of the productivity of a company's fixed assets
(property, plant and equipment or PP&E) with respect to generating sales. Hinopak
has 13 times of fixed asset turnover, means Hinopak generates 13 times revenues
from its fixed asset. If we compare the result with industry Hinopak is showing
better position this time.

Page 29
 Hinopak Motors

Total Assets Turnover

It is the relation between company’s total assets and net sales. This Indicates that
Hinopak generates 2.4 times revenues by total assets of its own worth. If we
compare with the industry Hinopak is showing worse position.

Page 30
 Hinopak Motors

Profitability Ratios
Gross Profit Margin
Gross profit margin shows the overall record of management in producing profit.
Hinopak has 10.29% of Gross profit margin means it generates gross profit 10.29%
of its Net Sales during a year. If we compare with the industry, company is showing
worse position.

Operating Profit Margin

Operating profit margin shows the overall record of management in producing
profit. It is the relationship between operating profit and net Sales. Hinopak has 7%
of operating profit margin if we compare with the industry company is showing
worse position.

Page 31
 Hinopak Motors

Net Profit Margin

Net Profit margin indicates firm’s ability or measures the overall record of
management in producing profit. Hinopak has 0.57% net profit margin means it
generates 0.57% of Sales into profit. Against industry Hinopak is showing worse
Position.

Return on Assets
This ratio indicates how profitable a company is relative to its total assets. The
return on assets (ROA) ratio illustrates how well management is employing the
company's total assets to make a profit. The higher the return, the more efficient
management is in utilizing its asset base. Return on assets measures firm’s over
record of management in producing profit. Hinopak has 1.39% ROA. If we compare
the result with result of industry, Hinopak is showing worse position.

Page 32
 Hinopak Motors

Return on Equity
Return on equity measures firm’s overall record of producing profit. Hinopak has
4.19% returns on equity mean generates 4.19% profit from equity during a year. It
is the relationship between net profit and trade capital. If we compare the results,
Hinopak is showing worse position.

Page 33
 Hinopak Motors

Time Series Analysis

Year 2006, 2007, 2009

Page 34
 Hinopak Motors

Current ratio
Current ratio measures firm’s ability to meet its short term obligations, it shows the
relationship between current assets and current liabilities. In year 2006 current ratio
was 1.39. it means current assets were 1.39 times more than current liabilities. In
year 2007, current ratio rise to 1.5 and in 2009 it is 1.33 times. If we evaluate the
performance company is in stable position showing mixed trends in current ratio.

Years 2006 2007 2009

Current ratio 1.39 1.5 1.33

Quick ratio
Quick ratio measures a firm’s ability to meet its short term obligations. The quick
ratio is more conservative than the current ratio because it excludes inventory and
other current assets, which are more difficult to turn into cash. Therefore, a higher
ratio means a more liquid current position. Hinopak has quick ratio of 0.4 times in
2006, in 2007 it reached to 0.6 and in 2009 it was 0.54 times. If we evaluate the
performance over the period of time Hinopak is showing better position.

Years 2006 2007 2009

Quick ratio 0.4 0.6 0.54

Cash Ratio
Cash ratio measures a firm’s ability to meet its short term obligations. The cash
ratio is an indicator of a company's liquidity that further refines both the current
ratio and the quick ratio by measuring the amount of cash; cash equivalents or
invested funds there are in current assets to cover current liabilities. Hinopak has
cash ratio of 0.05 times in 2006, in 2007 it reached to 0.097 and finally in 2009 it
falls to 0.02. This time Hinopak is showing worse position over the period of time,
showing decreasing trend in Cash Ratio.

Years 2006 2007 2009

Cash ratio 0.05 0.097 0.02

Page 35
 Hinopak Motors

Working Capital
Working Capital measures firm’s ability to meet its short-term obligations. If a
company's current assets do not exceed its current liabilities, then it may run into
trouble paying back creditors in the short term. In 2006 Hinopak has working capital
of 917457 lacks, 2007 it raised to 1335393 lacks and finally in 2009 it was 7052445
lacks.

Years 2006 2007 2009

Working Capital 917457 1335393 7052445
(Rs)

Debt Ratio
Debt ratio measures firm’s ability to meet its long-term obligations. It is the
relationship between total liabilities and total assets. In 2006 Hinopak has debt ratio
of 0.6 times, in 2007 it remained 0.6 and in 2009 it reached to 0.61. If we evaluate
the performance Hinopak is in stable position as far as collection of debts are
concerned.

Years 2006 2007 2009

Debt Ratio 0.6 0.6 0.61

Debt to Equity ratio

Debt to equity measures firm’s ability to meet its long-term obligations and
commitments. It is the relationship between total liabilities and Total shareholders’
equity. In 2006 Hinopak has Debt to equity ratio of 1.2 times of its equity, in 2007 it
reached up to 1.45 times and finally 1.84 times in 2009. If we evaluate the
performance this increasing trend is showing worse position over the period of time.

Years 2006 2007 2009

Debt to equity 1.2 1.45 1.84
ratio

Page 36
 Hinopak Motors

Time interest earned

Time interest earned measures the firm’s ability to meet its long-term obligations. It
is the relationship between Operating profit and Finance Cost. Hinopak has 11.57
times in 2006, in 2007 it raised to 15.32 and finally in 2009 Time interest earned
ratio falls to 1.17 times. If we evaluate the results over the period of time, company
was stable in 2006 and 2007 but, in 2009 company shows worse position.

Years 2006 2007 2009

Time interest 11.57 15.32 1.17
earned

Account receivable Turnover

Account receivable turnover indicates that how many times a company converts its
receivable into cash during a year. In 2006 Hinopak has A/R turnover of 12.7 times,
in 2007 it falls to 9.6 times and in 2009 it raised to 11 times. Therefore if we
evaluate the performance over the period of time, company is showing stable
position.

Years 2006 2007 2009

A/c 12.7 9.6 11
Rec.Turnover

Average collection period

Avg. Collection period indicates that after how many days a company converts it’s
receivable into cash. It is the relation between number of days in a year and
account receivable turnover. In 2006 collection period was 28.34 days, in 2007 it
increased to 37 days and finally in 2009 it decreased to 33 days. If we evaluate the
performance over the period of time, company is showing stability.

Years 2006 2007 2009

Avg Collection 28.34 37 33
Period (Days)

Inventory Turnover
Inventory turnover indicates that how many times a company converts its inventory
into cash or sales. It is the relationship between cost of sales and Avg. inventory. In
2006, inventory turnover was 2.33 times, in 2007 it increased to 2.6 times and in

Page 37
 Hinopak Motors

2009 it again increased, to 4.54 times. Over the period of time, company is showing
better position with their inventory returns.

Years 2006 2007 2009

Inventory 2.33 2.6 4.54
Turnover

Page 38
 Hinopak Motors

Fixed asset Turnover

This ratio is a rough measure of the productivity of a company's fixed assets
(property, plant and equipment or PP&E) with respect to generating sales. In 2006,
fixed asset Turnover was 7.38 times, in 2007 it increased to 8.8 times and in 2009 it
reached to 13 times. Over the period of time, Hinopak shows increasing trend thus
showing very good performance with fixed assets.

Years 2006 2007 2009

Fixed Asset 7.38 8.8 13
Turnover

Total asset Turnover

It is the relation between company’s total assets and net sales. In 2006, it indicates
that Hinopak generates 1.5 times revenue by total assets of its own worth. In 2007,
it increased to 1.6 times and in 2009 it reached to 2.42 times. Over the period of
time, company is showing good performance.

Years 2006 2007 2009

Total Asset 1.5 1.6 2.42
Turnover

Gross Profit margin

Gross profit margin shows the overall record of management in producing profit. It
is the relation between gross profit and net sales. In 2006 G/P margin was 13.05%,
in 2007 it increased to 18%, and finally in 2009 it falls to 10.29%. Over the period of
time Hinopak shows average performance due to mixed trends in G/P margin.

Years 2006 2007 2009

Gross Profit 13.05 18 10.29
Margin (%)

Page 39
 Hinopak Motors

Operating Profit Margin

Operating profit margin shows the overall record of management in producing
profit. It is the relationship between operating profit and net sales. In 2006 Hinopak
had 8.76% of O/P margin, in 2007 it raised to 12.36 % and finally in 2009 O/P
margin is 7%. Over the period of time Hinopak is showing stable results on average.

Years 2006 2007 2009

Operating 8.76 12.36 7
Profit Margin
(%)

Net Profit Margin

Net Profit margin indicates firm’s ability or measures the overall record of
management in producing profit. It is the relation between net profit and net sales.
In 2006, N/P margin was 5%, in 2007 it increased to 7.53% and in 2009 it falls to
0.57%. Over the period of time Hinopak is showing worse position over Net profit
margin.

Years 2006 2007 2009

Net Profit 5 7.53 0.57
Margin (%)

Return on Assets
This ratio indicates how profitable a company is relative to its total assets. The
return on assets (ROA) ratio illustrates how well management is employing the
company's total assets to make a profit. The Return on assets measures firm’s over
record of management in producing profit. Hinopak had 7.82% ROA in 2006, in 2007
it was 12% and in 2009 it falls to 1.39%, shows worse position over the period.

Years 2006 2007 2009

Return on 7.82 12 1.39
Assets (%)

Page 40
 Hinopak Motors

Return on Equity
Return on equity measures firm’s overall record of producing profit. Hinopak had
22.76% of ROE in 2006, 2007 it increased to 31.24 % and unfortunately in 2009 it
falls to 4.19%. If we analyze the performance over the period of time Hinopak is not
showing stable position, due to fluctuating trend.

Years 2006 2007 2009

Return on 22.76 31.24 4.19
Equity (%)

Page 41
 Hinopak Motors

Graphical
Representation of
Time Series Analysis

Page 42
 Hinopak Motors

Short Term Solvency Ratios

Long term Solvency Ratios

Asset Utilization Ratios

Page 43
 Hinopak Motors

Profitability Ratios

Page 44
 Hinopak Motors

Financial Statements
Income Statement 2009 2007 2006
Rs. in Rs. in Rs. in
% % %
million million million
Sales - net 12,151.0 100.00 7,826.78 100.0 6,392.28 100.0
2 0 0
Cost of sales 10,899.7 89.70 6,439.14 82.27 5,557.70 86.94
8
Gross profit 1,251.24 10.30 1,387.64 17.73 834.58 13.06
Distribution expenses 399.78 3.29 268.98 3.44 188.53 2.95
Administration expenses 206.77 1.70 140.39 1.79 119.72 1.87
Other operating expenses 19.95 0.16 68.10 0.87 38.77 0.61
Other operating income 169.61 1.40 57.61 0.74 72.62 1.14
Profit from operations 794.35 6.54 967.78 12.36 560.18 8.76
Finance cost 678.53 5.58 63.17 0.81 48.42 0.76
Profit before taxation 115.82 0.95 904.61 11.56 511.76 8.01
Taxation 45.91 0.38 314.56 4.02 187.88 2.94
Profit after taxation 69.91 0.58 590.05 7.54 323.88 5.07

Balance Sheet

Property, plant and equipment 948.54 18.94 887.12 18.06 864.53 20.88
Other noncurrent assets 5.50 0.11 3.20 0.07 0.71 0.02
Long-term deposits 5.48 0.11 6.00 0.12 8.30 0.20
Long-term loans and advances 13.09 0.26 7.12 0.14 6.76 0.16
Current assets (excluding 4,034.44 80.58 4,008.10 81.61 3,259.54 78.74
investments)
Total assets 5,007.05 100.00 4,911.54 100.0 4,139.84 100.0
0 0
Shareholders' equity 1,668.06 33.32 1,888.56 38.45 1,422.85 34.37
Long-term security deposits 32.00 0.64 32.00 0.65 30.00 0.72
Liability against assets
subject to finance lease 0. 0.00 5. 0.14
- 00 - 69
Deferred taxation 11.50 0.23 33.59 0.68 48.67 1.18
Surplus on revaluation of fixed 277.49 5.54 284.68 5.80 290.54 7.02
assets
Short term debt (including
current maturity of long term 1,400.49 27.97 110.08 2.24% 266.62 6.44
debt)
Other Current Liabilities 1,617.51 32.30 2,562.63 52.18 2,075.47 50.13
%

Page 45
 Hinopak Motors

Total equity and liabilities 5,007.05 100.00 4,911.54 100.0 4,139.84 100.0
0 0

Page 46
 Hinopak Motors

Calculations of IGR &

SGR Year 2009

Page 47
 Hinopak Motors

Internal Growth Rate

IGR=ROA*b1-(ROA*b)*100

IGR=0.0139*0.68961-(0.0139*0.6896)*100

IGR=0.98%

Sustainable Growth Rate

SGR=ROE*b1-(ROE*b)*100

SGR=0.0419*0.68961-(0.0419*0.6896)*100

SGR=2.97%

Page 48
 Hinopak Motors

Performa Financial
Statements on the Basis of
SGR
Income Statement 2009 2010
Rs. in
Rs. in million
million
Sales - net 12,151.02 12511.91
Cost of sales 10,899.78 11223.51
Gross profit 1,251.24 1288.40
Distribution expenses 399.78 411.66
Administration expenses 206.77 212.92
Other operating expenses 19.95 20.54
Other operating income 169.61 174.64
Profit from operations 794.35 967.78
Finance cost 678.53 817.94
Profit before taxation 115.82 119.25
Taxation 45.91 47.27
Profit after taxation 69.91 71.98

Balance Sheet

Property, plant and equipment 948.54 976.71

Other noncurrent assets 5.50 5.66
Long-term deposits 5.48 5.64
Long-term loans and advances 13.09 13.47
Current assets (excluding 4,034.44 4034.44
investments)
Total assets 5,007.05 5155.75
Shareholders' equity 1,668.06 1717.60
Long-term security deposits 32.00 32.95
Liability against assets
subject to finance lease -
Deferred taxation 11.50 11.84
Surplus on revaluation of fixed 277.49 285.73
assets
Short term debt (including
current maturity of long term 1,400.49 1442.08

Page 49
 Hinopak Motors

debt)
Other Current Liabilities 1,617.51 1665.55
Total equity and liabilities 5,007.05 5155.75

Page 50
 Hinopak Motors

Overall Analysis and

Recommendations

Page 51
 Hinopak Motors

Overall Analysis

It has been enigmatic extended financial year, the sales revenue was highest ever
and the company’s share of 56% in the national sales was also close to the highest
57% achieved in 2003. The exchange loss stood at Rs. 563 million compared to only
Rs. 31 million in the corresponding period last year due to depreciation of rupee
against US dollar by 34% and the appreciation of Japanese Yen against US dollar by
22%, highest in 13 years. The financial cost also increased by Rs. 79 million due to
larger borrowings and higher interest rates in the latter half. Production cost also
risen because of depreciating rupee and rising cost of materials. The distribution
and administrative expenses increased to Rs. 607 million from 409 million chiefly
due to inflation.

Page 52
 Hinopak Motors

Recommendations
Hinopak needs to improve its sale volume by manufacturing low cost vehicles which
should be greater fuel efficient, advance featured and efficient sales back up with
high quality. Hinopak needs to use its available resources with full efficiency. As we
have seen in analysis of Hinopak and industry, Hinopak is showing unstable
performance due to which all financial ratios are decreasing. Hinopak should curtail
its borrowings and increase its investments which will give a handsome return. Due
to capacity expansion project the cost of depreciation is very high. Management
need to review the rate of depreciation which charges on fixed assets. Hinopak
requires finding new ways to fulfill its financing needs because the interest rates on
which bank are providing loan is very high or Hinopak should issue new share in
market to full fill its financing need. Hinopak should use its excess available cash in
different mutual fund and bond scheme in order to earn other income.
The struggle ahead looks long and hard. The management can only promise to work
hard and as long as it takes, and asks for the understanding of the shareholders
with whom it has always generously shared its profits.

Page 53