We reinstate coverage on Honda Atlas Cars (Pakistan) Limited (HCAR) with a Buy stance and a DCF- based Target Price of PKR345/sh. The stock trades at an attractive MY20E P/E of 7.2x against the average of 8.1x for the peer.
Our liking for the stock is underpinned by; (i) robust volume growth in the challenging environment, (ii) potential introduction of new models in existing and new categories, (iii) high likelihood of further price increase in near-term, and (iv) steep underperformance of the stock (21/36% in 3/6 mth vs KSE-100 index).
We highlight that potential announcement of capacity expansion/BMR along with launch of new model/variant could unlock the value in the stock.
Furthermore, HCAR's relatively lower exposure to regulatory headwinds should help the company to stand out from the competition.
Risks include: (i) stronger steel prices, (ii) higher than anticipated change in exchange rate and policy rate, (iii) lower than expected impact from adverse regulatory changes for non filers, and (iv) weaker ability to withstand competitive environment.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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