Equity Analysis /

Pakistan Autos: March – Industry sales sustain robust growth momentum

  • Auto Industry sales clocked in at c.27,000 units, up 30% yoy, largely led by the Economy segment

  • PSMC led the yoy growth for the sector, touching 15,000 units, while INDU posted record monthly sales

  • We have a Marketweight stance on the Auto sector with a preference for INDU (TP of PKR1,455/sh)

Intermarket Securities
12 April 2022

In March 2022, Auto industry sales rose by a sharp c.30% yoy and c.25% mom to c.27,000 units, largely led by the Economy segment, which was followed by INDU (record monthly sales). Thus, 9MFY22 sales clocked in at c.205,000 units (up a strong c.50% yoy).

Among INDU models, combined volumes of the Premium segment cars, Fortuner and Revo, increased by c.35% yoy, while combined Corolla & Yaris volumes remained flat yoy. We assume slowdown in Yaris sales to have likely dragged the combined sales. On a mom basis, the maintenance plant shutdown in February is likely to have led to the rise in sales due to pent-up deliveries, in our view.

PSMC sales clocked in at a c.15,000 units for the third time since July 2021, up a sharp c.50% yoy, led by handsome sales of Alto and rebound in Wagon R sales. Although double-digit yoy growth was witnessed in most models, Cultus volumes shrunk by a massive c.80% yoy, likely due to part shortages (especially for the AGS variant), in our view

HCAR sold c.3,650 units in March, up c.15% yoy, led by combined Civic & City sales of c.3,275 units, on account of rolling out of both the new City and new Civic. On a mom basis, volumes rose by 33%, as Civic deliveries resumed towards the end of the month, in our view. 

Tractor sales remained flattish yoy at c.5,650 units, largely led by AGTL (up c.25% yoy to 2,560 units). Sales for MTL however, declined by c.10% yoy to c.3,100 units, as the plant had been shut down for about 3 weeks.  We expect tractor sales to resume the uptrend in the coming months amid elevated farmer income. However, the growth will be checked by delays in GST refunds, in our view.

Despite measures taken by both the government and SBP to moderate growth in auto sales, volumes in March witnessed handsome yoy growth (largely led by the Economy segment). However, industry growth is likely to retract in the coming months due to (i) measures aimed at reducing auto-financing (including higher interest rates), (ii) increase in prices, and (iii) longer delivery lead times on account of supply-chain issues (semiconductor chips and other parts). Also, prolonged Russia-Ukraine conflict and lockdowns in China due to covid, are likely to further exacerbate supply chain constraints, in our view. We therefore have a Marketweight stance on the Auto sector with a preference for INDU (TP of PKR1,455/sh).