Autos: Earnings growth underpins resilience of incumbents
INDU is scheduled to announce earning for 2QFY18 on 23rd Feb, where we expect the company to post NPAT of PkR3.85bn (EPS: PkR49.03) in 2QFY18 vs. net profit of PkR3.03bn (EPS: PkR38.51) in 2QFY17 - up 27%YoY. Earnings growth is largely from a shift to high margin, big-budget SUV sales, while below the line expenses are relatively tepid. For PSMC, we expect the company to post consolidated NPAT of PkR3.97bn (EPS: PkR49.39) in CY17 vs. NPAT of PkR2.77bn in CY16; up 43%YoY. The 32%YoY climb in sales, owing to organic sales growth based on strong fleet sales, and significant uptick in recently launched product offerings, despite the higher price tag associated with these offerings. Prominence of these models in PSMC's sales stands contrary to the widely held perception of PSMC having low quality products, competing solely on price. Factoring in the link between earnings growth and cash flows being diverted to growth initiatives, we believe local OEMs are fortifying their operational fundamentals for the next leg of long term industry rivalry. With improving fleet sales (Wagon-R & Cultus), upgraded models (consistent CAPEX on localization) and expectations of newer offering, PSMC comes up to be our top pick in the sector; offering an upside of 35.9% to our DCF based TP of PkR691.51/sh.
Indus Motor is engaged in the assembly, progressive manufacture, import and marketing of Toyota motor vehicles. Co. is also the sole distributor of Toyota and Daihatsu vehicles in Pakistan.
Pak Suzuki Motor is engaged in assembling, progressive manufacturing and marketing of Suzuki cars, pickups, vans, and 4X4 vehicles. Co.'s product models include Baleno, Margalla, Mehran, Kyber, Ravi Pickup, Bolan Van and Potohar Jeep.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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