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Pakistan Autos: April industry sales declined due to Ramadan

  • Auto sales declined, while sustaining the 17,000 units level in April, on the account of reduced work hours in Ramadan
  • PSMC led the charge with c.8,600 units sold, followed by INDU with c.5,400 units. MTL sustained the 3,000 units level
  • We prefer INDU (TP PKR1,458/sh), and PSMC (TP PKR450/sh), as our top picks

In April 2021, auto industry sales fell 17% mom to c.17,000 units, on account of lower production and reduced working hours during the month of Ramadan, while tightening of restrictions amid third wave of Covid-19 also played a part, in our view. Despite the reduced work hours, we believe that the industry was able to contain the decline due to the resolution of supply-chain issues. PSMC added most units to total industry sales. 

Among INDU models, Yaris volumes declined by 22% mom, while sales for the other Premium models fell by c.18% mom. We expect sales in May to remain at around present levels, where lost production amid the unusually long Eid holidays, will be offset by ramped up production (overtime shifts).   

HCAR sold c.2,300 units in April, with combined sales of Civic and City of c.2,100 units, down 27% mom. BR-V sales witnessed a sharp c.60% mom decline to 234 units. Sales may fall further in May ahead of the new City launch, as pre-bookings have commenced from today.

PSMC's Wagon R sales rose 15% mom  to c.1,450 units (highest monthly sales since July 2019), while the sales of Alto/Cultus declined by 14%/20% mom. We expect PSMC sales to continue the present momentum in the remainder of CY21, where the impact of new competition is likely to remain moderate, in our view. 

Sales of Hyundai clocked in at 896 units in April (up a handsome 24% mom), led by a 6x mom rise in Elantra, while sales of the Tucson declined 18% mom to c.500 units. Sales of the H-100 Porter, however, rose a sharp 77% mom to 113 units.

Tractor industry recorded sales of c.4,500 units, down 19% mom. AGTL sales fell 36% mom to c.1,300 units, while that of MTL declined a modest 9% mom to c.3,200 units. We expect tractor sales to resume the uptrend in the coming months as farmer income continues to expand, ahead of the Rabi harvesting season. MTL sales may also benefit from an increase in exports.

April witnessed a drop in sales following reduced working hours during the month of Ramadan (from the 14th of April). Low interest rates and new models from both new entrants and incumbent OEMs will help bring back robust demand for cars, in our view. We highlight that the incumbent OEMs (INDU and PSMC) are insulated from the ongoing semiconductor chip shortage, unlike Hyundai and other new entrants (Tucson bookings have closed due to the shortage, according to news reports).

We have an Overweight stance on both the Auto and Tractor OEMs, with Buy rating on all the scrips under coverage. We prefer INDU (TP of PKR1,458/sh), and PSMC (TP of PKR450/sh), as our top picks.


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