Equity Analysis /
Pakistan

Pakistan Autos: March sales disrupted by the lockdown

  • Pakistan Auto industry sold 6,922 units in March 2020, down 43% mom and 70% yoy. This took 9MFY20 sales to 98,395 units

  • Among the OEMs, HCAR sales declined the least in March, while PSMC led the decline (-27% vs -50%), INDU -43% decline

  • Tractor industry recorded sales of 2,918 units, down 7% mom and down 49% yoy. AGTL saw a 22% mom decrease, MTL flattish

Intermarket Securities
10 April 2020

Pakistan's Auto industry sold 6,922 units in March 2020, down 43% mom and 70% yoy. This took 9MFY20 unit sales to 98,395 units, down 46% yoy. Passenger car sales declined 44% mom, primarily due to weak demand and halt in sales amid Covid-19 related lockdown, in our view. Among the OEMs, HCAR sales declined the least in March, while PSMC led the decline. 

INDU sales declined by 43% mom (down 50% yoy), to 2,593 units. This brings 9MFY20 sales to 25,293 units (down 49% yoy). Corolla sales declined 44% mom to 2,089 units, which could be attributed to the anticipated launch of new model Yaris (albeit, which has been delayed). Recall that Yaris will replace the 1,300cc Corolla Xli and Gli. Hilux sales grew by 38% yoy.

City and Civic sales of HCAR declined 29% mom to 1,327 units, while BRV sales fell 13% mom. This brings HCAR’s 9MFY20 sales to 14,061 units (down 60%yoy) and MY20 sales to 22,407 units (down 54%yoy to 48,369 units). This is the sharpest decline among OEMs during 9MFY20.

PSMC saw a decline in sales of 50% mom and a staggering 81% yoy. Sales of the Wagon R and Cultus both declined by 54% mom, while that of Alto (biggest brand by unit sales) declined by 45% mom. PSMC’s 9M sales are down 40% yoy to 58,273 units.

Tractor industry recorded sales of 2,918 units, down 7% mom and down 49% yoy. Sales for AGTL saw a 22% mom decrease, while those of MTL were flattish mom. This brings the 9MFY20 industry sales to 23,499 units (down 38% yoy). Sales of 2/3 wheelers declined by 36%mom and 35% yoy decline.

With the country in a state of lockdown, auto sales are expected to remain on a downward trajectory for the remainder of FY20. Pick up in sales may be delayed after the lockdown, in our view, due to the recent PKR depreciation, which may result in an increase in car prices. However, following the recent monetary easing of 225bps, auto-financing may pick up earlier than expected. INDU is our top pick with a TP of PKR1,273/sh, due to the availability of sufficient cash and investments in an uncertain business environment (also more comfort on payouts) and the jump in sales expected due to the Yaris launch.