Intermarket Perspective - GTYR: Growth triggers awaited; initiate with Neutral
- We initiate coverage on GTYR, the largest tyre manufacturer in Pakistan, with a TP of PRs210/sh and a Neutral rating. Penetration in the replacement market and impetus from the truck segment (sponsors own GHNI and GHNL) underpin our 3yr sales CAGR of 15%. However, this is balanced by premium valuations and risk of incumbent OEMs shifting to imported tyres going forward.
- GTYR’s products are used by all Auto OEMs but market share in the large replacement market is estimated at just 7%. We believe this is set to increase due to (i) PKR weakness / higher customs valuation making imported tyres more expensive, and (ii) increased capacity to meet growing replacement demand. Potential restoration of Regulatory Duty on imported tyres can act as a strong catalyst.
- GTYR trades at a FY18/19F P/E of 12.7x/11.7x, at a premium of 28% to the Auto OEMs. We believe this is largely justified due to higher medium-term growth prospects for GTYR where P/E compresses to < 10x on FY20F earnings. We like potential for GTYR to explore contracts with new entrants in Pakistan’s auto space while also considering possibility of expanding into radial truck tyres, which can unlock more upside.
General Tyre & Rubber Co. of Pakistan is engaged in the manufacture and sale of rubber tires and tubes, including tires for vans, pick-ups, four wheel drive vehicles, tractors, race cars, light trucks, buses, heavy trucks, minibuses, and other vehicles. Co.'s products are exported to the United Kingdom and sold in Pakistan to new vehicle manufacturers and businesses engaged in vehicle tire related services.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.