Equity Analysis /
Pakistan

Pakistan Autos: May’22 - Dull sales in May despite normal working hours

  • Auto Industry sales clocked in at c 23,000 units, up 46% yoy (flattish mom), largely led by the Economy segment

  • PSMC led the yoy growth for the sector, touching c.12,200 units, followed by HCAR; MTL led the Tractor segment

  • We have a Marketweight stance on the Auto sector with a preference for INDU (TP of PKR1,416/sh)

Abdul Ghani Mianoor
Intermarket Securities
13 June 2022
  • In May 2022, automobile industry sales rose by a sharp 46% yoy (flattish mom) to c 23,000 units. The Economy segment continues to drive the robust yoy growth in industry sales. Thus, 11MFY22 sales clocked in at c 250,000 units (up a strong 50% yoy). Despite normalized working hours in May (following Eid festivities during the first week), volumes remained flattish, likely due to supply chain issues, in our view.

  • Among INDU models, combined volumes of the Premium segment cars (Fortuner and Revo), increased by c 50% yoy, while combined Corolla & Yaris volumes increased by a relatively softer 18% yoy. The shift in production towards the Premium segment (earlier had been delayed), is likely to have resulted in the increase in Premium segment, in our view.

  • PSMC sales clocked in at a c 12,250 units, up a sharp 47% yoy, led by handsome growth in Alto and Wagon R volumes. The recently launched Swift continued to rake up decent volumes of c 1,750 units. We believe Swift sales are likely to support margins of the company in the coming quarter.

  • HCAR sold 2,910 units in May (below the 3,000 units level for the fifth time since July 2021), up 45% yoy, led by combined Civic & City sales of 2,681 units, on account of rolling out of both the new City and new Civic. On a mom basis, overall volumes increased by 11%. 

  • Tractor sales rose by 17% yoy at 4,906 units. Volumes of AGTL increased by a sharp 85% yoy to c 2,400 units (down 8% mom), while that of MTL decreased by 14% yoy (up 12% mom). The decline in MTL sales is likely due to reduced exports, in our view. We expect tractor sales to continue the uptrend in the coming months amid elevated farmer income and abolishment of GST in the recently announced budget, in our view.

Auto sales continued the handsome yoy growth in May, despite measures taken by both the government and SBP to moderate growth in auto sales, as the OEMs are likely delivering orders booked at least 3-4mths prior. Going forward, industry growth is likely to retract in 2HCY22 due to (i) measures aimed at reducing auto-financing (including higher interest rates), (ii) recent increase in prices, (iii) longer delivery lead times on account of supply-chain issues (parts and container issues), and (iv) increase in advance tax and possible austerity measures to reduce government expenditures on car purchasing. Lockdowns in China due to Covid and the ongoing Russia-Ukraine conflict are likely to exacerbate supply chain constraints, in our view. We have a Marketweight stance on the Auto sector with a preference for INDU (TP of PKR1,416/sh).