Pakistan Autos_PSMC lands in a macro sweet spot, (AKD Daily, Jul 07, 2021)
AKD Daily
Pakistan Autos: PSMC lands in a macro sweet spot,
- Primary beneficiary of the announced budgetary measures — Pak Suzuki Motors Company (PSMC) is likely to witness strong uptick in volumes with avg. passenger car retail price to be potentially reduced by PkR0.1mn. Resultantly, we expect 2HCY21 sales registering a growth of 13.0% over 1HCY21, with further carry over the medium run (CY21-23 CAGR: +9.3%YoY).
- Commodity bull run and reversal in PkRUS$ trend is expected to keep margins in check in CY21. However, normalization in commodity prices in the medium run should expand margins in our view (CY22-23 avg.: 6.9% vs. 5.9% in CY21E).
- Hence, we expect earnings to register a CY21-23F CAGR of 24.1%. Upside to our estimates could come from limited pass-through of price benefits to end consumers (companies are yet to announce revised retail prices). In our base case, we have incorporated new model of Swift from CY22 with related-Capex reflecting in 1QCY21 financial statements (CWIP: +PkR2.3bn).
- We have a BUY stance on PSMC with a Dec ’22TP of PkR396/sh, implying an upside of 17% on last close. The stock is currently trading at CY22/23F P/E multiple of 7.1x/7.2x. Key risks to our thesis comes from potential reduction in duties on imported CBUs under consideration in the upcoming Auto policy 2021-26.
AKD Research
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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