Akseer Research ...
  • Musadiq Jawaid

Auto sector update: Are volumes approaching an off-the-cliff fall?

  • Passenger car sales during 5MFY19 rose 1.0% YoY, which allowed listed automobile manufacturers to limit decline in volumes to 2.0% YoY during the period.
  • Amid dismal volumetric performance by other vehicle categories (declines for LCVs, HCVs, Tractors and three wheelers ranged from -13% to -26%, while M/Cycles sales have remained flat), the outperformance of passenger car segment is likely to have been driven by 1) large order book at the start of the year, 2) pre-buying resulting from pre-announced and staggered price increases.
  • That said, the delivery periods of ‘The Big-3’ OEMs have almost halved during 5MFY19, which indicates that new bookings are likely to have fallen steeply. Sep-18 customer advances fell 23% QoQ for INDU and 48% QoQ for PSMC.
  • 1QFY19 gross margins have already taken a hit. From FY18 averages, gross margin fell 290bps for INDU to 14.5%, 330bps for PSMC to 6.6% and 550bps for HCAR to 6.4%.
  • With FY19 volumes likely to have been concentrated in 1HFY19, there exists a big possibility that volumes could nose-dive at the onset of 2HFY19. With competition from new players set to increase in 1HFY20, the auto sector seems to be heading into a tumultuous year.
  • We remain underweight on Autos as the sector faces several headwinds entering into to CY19 including rising competition, weak demand, and rising cost pressures.
Akseer Research (Pvt) Limited
Akseer Research (Pvt) Limited

Akseer is a Research & Analytics firm based out of Pakistan that specializes in Equity Research and Corporate Finance. Our team has exposure to a wide range of sectors including Economy, Banking, Telecommunications, Retail, Real Estate, Construction and Materials, Pharmaceuticals, Food, Energy, Chemicals and Petrochemicals. We have experience of covering companies in Middle East, Americas, Far East and South Asia.

Akseer Research

Musadiq Jawaid

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