Pakistan Autos_Gravity of a weak economy catches up with auto sales, (AKD Daily Jul 12, 2019)
- June'19 total automotive industry sales tapered to 16,288 units (-11%MoM/-15%YoY) closing FY19 with total industry sales of 245,724 (-9%YoY).
- Major constituents of total industry sales for FY19 moved -5%/-37%/-29%YoY for Passenger Cars/Trucks/Tractors while LCVs & Pickups sales slipped (-21%YoY) mostly from rapidly rising prices, adverse regulatory measures enforces by the GoP, amidst falling disposable incomes (hindered by petrol prices, cost of borrowing) effectively deflating consumer durable demand.
- Segment-wise sales composition in the passenger car segment confirm the trend of relative resilience in premium segment sales (1,300CC+ segment sales up 2%YoY), with mid-segment sales showing strong growth (1,000CC sales up 11%YoY, mostly from the new model effect) as the small segment sales slag (800CC sales drop 27%YoY)
- Bearish sentiment prevailing in the wider market has squeezed auto sector valuations, forcing attractive levels, despite wider questions over organic demand growth, medium term competitive environment (KLM confirming Sportage launch for Sept'18) and pricing power of OEMs following drastic price hikes (~25-40%YoY rise between June'18 vs. June'19).
- We believe INDU remains a high quality offering, with its blend of demand growth from premium SUV offerings, sturdy margins in sedan segment and cash heavy balance sheet augmenting robust competitive moats, arguably the best placed to weather competitive pressures. Moreover, we have a FCFE based TP of PkR1,465/sh, trading at FY19/20F P/E of 6.8x/6.7x, offering upside of 33% at current levels.
Pak Suzuki Motor is engaged in assembling, progressive manufacturing and marketing of Suzuki cars, pickups, vans, and 4X4 vehicles. Co.'s product models include Baleno, Margalla, Mehran, Kyber, Ravi Pickup, Bolan Van and Potohar Jeep.
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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