HCAR- Uncovering complexities of inventory issues, (AKD Daily, May 04, 2023)
- Over the course of 4QMY23, HCAR has hiked prices by cumulative ~35%, on the back of PkR devaluation (down by 17%QoQ), along with the increase in sales tax to 25% on vehicles with engine capacity of 1,400cc and above.
- HCAR’s production remains well below capacity (HCAR MY23 Production: 25,356 units, down by 35%YoY), leading to delivery times increasing to ~10 months.
- In 3QMY23 HCAR posted PAT of PkR 811mn (EPS: PkR5.68) higher by 82%YoY where company profitability was majorly driven by high gross margins amid frequent price hikes during the period. To note, prices across the company’s offerings increased by an average of 35% during the quarter.
- The stock is currently trading at ~5.4 times its MY24 earnings, compared to P/E of 8x averaged over past 5 years. We have a “Sell” stance on the stock with a Dec’23 target price of PkR127.0/sh, which offers a total return of 17.1% from last close, including a 2.1% dividend yield.
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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