INDU_Stratification of the Corolla is crucial for added value
Backing-up our recent price target upgrade for INDU to PkR2,192/sh (hike of 5.9% over previous TP), we base our bullish stance on: 1) furthered market penetration for a lower-end flanker variant, 2) revival of 'bandwagon effect' demand through upgrading the lower end offering of the flagship Corolla (making ~71% of revenues over FY18-21F), and 3) fortifying INDU's product suite to fend-off upcoming competition. In this case, we refine our expectations of a possible new model in the 1,000CC to 1,300CC category ( Toyota Vios - Oct'17 note "Toyota Corolla warrants an upgrade"), where we engrave our expectations based on channel checks, affirmative news flow and industry experts endorsing our case of the likelihood of an upgraded model announcement by 4QFY18-1QFY19. Looking at past product profiles, we highlight INDU's lack of offerings, making the case for INDU replacing the 1.3L Corolla variant exploring how INDU's margins move over a range of price points and expected demand from penetration/bandwagon-led demand, aiming to safeguard market share, while retaining profitability. While our workings remain preliminary, results indicate margins are augmented by brand segmentation, where a flanker could enhance gross margins by 25% and our fair value by a further ~16%. Currently, our BUY stance offers 22% upside, where 'likelihood' of new variants are sweeteners.
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.
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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