Intermarket Pulse: INDU - Upgrade to Buy on recent price correction
- We upgrade our stance from Neutral to Buy on INDU with rolled forward (Jun-19) TP of PRs1,980/sh (up 3% from PRs1,920/sh). Recent price correction has opened room for fresh entry points, in over view. Despite sector headwinds, two key elements of INDU underpin our liking; (i) pricing power and (ii) sizeable order book.
- In our estimates, we have revised down corporate tax (as proposed in FY19 budget) while incorporating super tax for FY19-20 (FY18 was already incorporated). Additionally, our gross margins are slightly higher (50bps on avg. over FY19-21), translating into c.2% higher EPS estimates. Consequentially, we have revised up DPS estimates as well, translating into DY of 9% for FY19F.
- INDU is currently trading at FY18/19F P/E of 9.0/7.8x, which appears attractive given its loyal customer base and swift price pass-on ability, in our view. For these reasons, INDU is well placed in the industry on risk-reward basis.
Indus Motor is engaged in the assembly, progressive manufacture, import and marketing of Toyota motor vehicles. Co. is also the sole distributor of Toyota and Daihatsu vehicles in Pakistan.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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