Autos: Look past soft December to strong CY17-end
Dec'17 total automotive industry sales were a mixed bunch with sales dampening to stand at 19,949 units (-8.3MoM/+19.5%YoY) but taking CY17 total industry sales to a high watermark of 249,034 units (+18.7%YoY). For the year, major constituents of total industry sales moved +15.7%/+38.8%/+299.2%/58.5%YoY for CY17.Passenger Cars/LCVs & Pickups/Trucks/Tractors, reflecting growing demand for locally assembled for passenger/commercial vehicle and tractors on the back of Infrastructure development and agriculture-led offtake. HCAR took the lead, posting growth of 49.5%YoY on the back of double-shift operations commencing from 2QCY17, followed by PSMC with surge in sales of 20.8%YoY, however INDU sales remained flat (-0.7%YoY) due to production capacity constraints. For the year INDU/HCAR/PSMC operated at annual capacity utilization level of 112%/95%/87%. Despite meeting working capital headwinds from a tightening import regime and Auto Policy reforms forcing payments on delayed deliveries, partial deposits on orders adding stress, assessing earnings quality, we conclude that high quality earnings are coming from the space (FCF per share /reported EPS resting at 0.9x for the sector). Driven by upcoming expansion in capacity (75K units/annum), healthy orderbook, persistent demand for LCVs/SUVs in the country, INDU's competitive inventory/payables turnover (~11x/10x for FY17-18E), FCFE/EPS quality of 0.9x for FY18-22F, and accompanying FY18E/19F D/Y of 6.2/6.2%, affirm our liking for the OEM.
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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