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Pakistan Autos: Sales are ‘up in smoke’, (AKD Daily, Sep 13, 2019)

• Aug’19 total automotive industry sales stood at 10,503 units down 20%MoM/43%YoY pulled lower by 17%MoM/41%YoY dip in passenger car (PC) sales to 9,126 units, 33%MoM/53%YoY decline in LCV offtake and 41%MoM/61%YoY fall in Truck sales, concluding five months of consecutive sales decline for the industry where TTM cumulative industry sales depict levels last seen in 2015
• Segment-wise sales during August show 1,300CC+ segment sales crumbling (down 17%MoM/63%YoY) in the absence of any major model upgrades (atypical for the segment) while relatively nascent offerings by PSMC in the mid (1,000CC sales down 6%MoM/50%YoY) and small segments (800CC & below segment sales down 21%MoM but up 19%YoY) fared relatively better
• 8MCY19 total industry sales amount to 145,133 units (-19.6%YoY) pressured by 17.4%/25.7%/47.2% declines in PC/LCV/Truck sales, with all major OEMs undergoing significant sales compression over the period as consistent price hikes, adverse regulatory measures and strains on durable spend outweigh catalysts int the form of the launch of the Alto and effective curtailment on the used import market
• Amongst major OEMS PSMC/INDU/HCAR sales for the month fell 21/10/22%MoM and 24/57/67%YoY while 8MCY19 cumulative sales moved lower by 15/14/36%YoY with most brands undergoing double-digit sales declines except PSMC’s Cultus (8MCY19 sales up 3.4%YoY) and INDU’s Corolla (sales slipped 6.8%YoY)
• With accelerating competition and any bottom in automotive demand too far off to call, we re-iterate our liking for INDU, where news reports confirm the much delayed (at least 2 years by our count) for the Corolla flanker brand (Yaris) with upscale specs, as per channel checks. Incorporating minor bump in sales from the launch (expected deliveries by Jan’19), INDU at current price levels looks attractive on multiples (FY20 P/E of 5.2x).

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