Equity Analysis /
Global

Pakistan Autos – February sales inch above 12,000 units, INDU leads the way

  • Pakistan's auto industry sold 12,089 units during February 2020, up 2% mom but down 39% yoy.

  • INDU sales rose 12% mom (although down 18%yoy), due to a significant increase in sales of the premium segment.

  • City & Civic sales of HCAR remained flat for the month at 1,868 units, PSMC saw decline in sales of 4%mom and 51%yoy.

Intermarket Securities
12 March 2020

Pakistan Auto industry sold 12,089 units during February 2020, up 2% mom but down 39% yoy. This took 8MFY20 sales to 91,473 units, down 43% yoy. Amongst the OEMs, INDU saw a sequential increase in sales, while sales of both HCAR and PSMC declined mom.

INDU sales rose 12% mom (although down 18%yoy), due to a significant increase in sales of the Premium segment. Fortuner and Hilux sales were up 41% and 37% mom respectively; notably, Hilux sales grew by a staggering 132%yoy (584 units compared to 252 units last year). Corolla sales also remained strong, increasing to 3,715 units from 3,445 in the previous month. The impressive pick-up in sales can be partly attributed to the ongoing promotions on the Corolla Xli, in order to sell out the remaining inventory ahead of the Yaris launch.

City and Civic sales of HCAR remained flat for the month at 1,868 units, while the BRV witnessed an 18% mom decline (normalizing of sales after the New-year effect seen in January sales).

PSMC saw a decline in sales of 4%mom and 51%yoy. Even though sales of the Wagon R, Swift and Bolan models grew 8%/ 29%/ 27%mom; sales for the Alto (its biggest brand by unit sales) continued on a downward trajectory (down 10% mom). Cultus sales also declined by 10% mom, after strong sales in January (sales in January saw an 85%mom increase).

Tractor industry recorded sales of 3,141 units, up 42% mom but down 22% yoy. Sales for AGTL saw a 25%mom increase, while those of MTL rose 54%mom. Sales of 2/3 wheelers declined slightly by 2%mom with a mere 1%yoy increase.

With slight improvements in the macroeconomic environment and possible interest rate cut later in March, we expect a moderate recovery in sales for the remainder of 2020. INDU is our top pick (Jun’21 TP: PKR1,273/sh) in the sector due to its strong brand image and likely impetus from the new model launch (Toyota Yaris). We also like PSMC (TP: PKR265/sh) as it will continue to benefit from curbs on imported CBUs while multiple price hikes in 2H19 should lift margins in the coming quarters, in our view.