Pakistan Auto_A paradigm shift in auto industry, (AKD Daily, Sep 30, 2021)
AKD Daily
Pakistan Auto: A paradigm shift in auto industry,
- As a proxy for latest developments, we breakdown the quarterly capex for the big three OEMs in order to highlight the paradigm shift in auto industry. So far, PSMC has incurred a capex of PkR3.4bn in 1HCY21 (+5.6xYoY), signaling new Swift in pipeline.
- INDU has spent PkR571mn in the latest quarter (FY21 capex: PkR2.5bn) whereas further PkR-5.1bn (US$300mn) is underway for capacity expansion in addition to US$100mn for the production of HEVs. In contrast, the capex for HCAR in the latest quarter has declined from PkR2.1bn to PkR234mn (-80%QoQ) after concluding its plant up gradation and finally starting the production of new Honda City in 1QMY22.
- The success of Kia’s Sportage and Hyundai’s Tuscon has heavily hampered the volumes of existing sedans. The local industry landscape has become competitive, hence, we can expect rising level of capex in upcoming quarters.
- Keeping in mind the resale value of Toyota, Suzuki and Honda cars, we expect the big 3 OEMs to sustain their position in the local industry landscape as the cars in Pakistan are not just a mode of transport but also an investment. On the other hand, we expect frequent new model rollouts by OEMs to fetch the ball back in their courts in terms of pricing power.
- Our preferred play for the sector remains INDU (TP: PkR1,774/sh), gearing up to penetrate the hybrid segment whereas PSMC (TP: PkR395/sh) remains our second best pick on the back of surging demand for small vehicles. We also have a positive stance on HCAR (TP: PkR325/sh) as the new model Euphoria is yet to subside.
AKD Research
Honda Atlas Cars (Pakistan) Limited. Honda Atlas Cars (Pakistan) Limited is engaged in assembling and progressive manufacturing and sale of Honda vehicles and spare parts. The Company's segments include Manufacturing and Trading. The Company's Manufacturing segment relates to the sale of locally manufactured cars and parts. The Trading segment relates to the trading of completely built units (CBUs) and parts. The Company's factory is located at Multan Road, Manga Mandi, Lahore. The Company offers car models, such as Honda Accord, Honda CR-V, Honda CR-Z, Honda HR-V, Honda Civic (over four models), Honda City Aspire (over four models) and Honda City (over four models) in various colors with a range of technology features. The Company's cars are available in colors, including crystal black pearl, bold beige, taffeta white, urban titanium, modern steel metallic, habenaro red, alabaster silver metallic, camelian red pearl and white orchid pearl. The Company is a subsidiary of Honda Motor Co., Ltd., Japan.
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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