Pakistan Autos_Economic headwinds ahead, (AKD Daily, May 31, 2022)
Pakistan Autos: Economic headwinds ahead
- GoP recently banned import of Autos for an initial period of 2 months, although this might get extended further. We believe this to have a positive impact on the sales of OEMs, due to the fact that the market for imported vehicles is going to dissipate. PSMC will be the biggest benefactor of this given the relatively stronger competition from imported vehicles in the less than 1000cc segment.
- The local OEMs are exposed to exchange rate volatility, mainly the Dollar, Yen, and the Baht. Where in every 5% devaluation in the Rupee, HCAR would lose PkR0.6/sh from the profits, PSMC would lose PkR1.2/sh, and INDU would lose PkR43.1/sh.
- SBP recently announced that tenures for auto-financing are to be reduced by 2 years, 5 years for cars in the below 1000cc segment, 3 years for cars above 1000cc. According to estimates, this will increase the monthly installments by ~40%. This along with rising interest rates means auto-loans will become more unaffordable for a significant portion of customers.
- Demand in the industry will reduce due to the new auto-financing tenures announced by SBP, further impacted by continuously rising prices for vehicles. However, the import ban is likely to act as a buffer in the short-term. Demand in the industry is likely to reduce by 20-30% in FY23, as per our estimates. In the short-term and upcoming quarter, sales are not expected to be impacted as the order books of the OEMS extend further than 2 months.
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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