Auto Sector_May'18 sales exhibiting signs of weakness
Monthly PAMA data reads total industry sales at 22,719units for May’18 (+5.05%YoY), showing signs of weaknesses on the back of Holy Month, with reduced working hours and production-side constraints (May’18 production down 5.5%/6.0/18.6% for INDU/HCAR/PSMC), closing 11MFY18 total industry sales at 249,308 units (+21.3%YoY). While Passenger Car sales clocked in at 18,223 units (-15.4%MoM/+4.3%YoY), PSMC lost major ground (-21.2%MoM) displaying signs of weakness across with Cultus sales slumping (-32.3%MoM/29.8%YoY) on the back of fulfillment of corporate orders for the OEM, and channel checks suggesting an ongoing assembly line upgradation. That said, passenger car sales were down -15.4%MoM, 1000CC/800CC & below segment plummeted, falling 19.9%/23.9%MoM. With 11MFY18 cumulative total industry sales nearing ~250K units mark (soaring past FY17 cumulative sales of 221,747), FY18 is expected to cross the finish line with heft. As INDU’s expansion activity close to fruition (Jun’18 expected on-boarding); lifting capacity to 75K units, and possible stratification of Corolla (adding fuel to fire-up additional capacity - expectations detailed in previous notes), INDU remains our top pick with a DCF based TP of PkR2,192/sh., calling for 50% upside from the current price levels.
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