AKD Securities Limited Equity Research – Daily Report

Karachi, August 20, 2019 (PPI-OT): Pakistan Autos: Consumers put the brakes on demand

July’19 total automotive industry sales of 13,119 units (-19%MoM/-41%YoY) amounts to the weakest monthly sales figure since Dec’14, leading 7MCY19 total industry offtake to close at 134,630 units (-17%YoY), where major constituents moved -15%/-23%/-46% for Passenger Cars/LCV and Pick-ups/Trucks for the cumulative period

Sector wide declines can be seen crossing the double digits, where July’19 sales for every segment fell between 42%YoY (for PC segment) and 30%YoY (for Trucks), depicting a strenuous demand picture, hindered by rising price tags and inflationary pressures burdening demand while soft consumer confidence indicates a holding back of discretionary consumer durable spending.

For the passenger car segment during July’19 the commencement of sales for the 660CC Alto failed to counter general industry decline (10,968 units sold -16%MoM/-42%YoY), while during 7MCY19 800CC and below/1000CC/1300cc plus segment slipped -25/+0.4/-15%YoY.

Amongst major OEMs, INDU and HCAR witnessed sales peak-out with July’19 offtake declining 56/66%YoY, while PSMC fared relatively better (decline of 23%YoY) on the back of a strong PC franchise. Over 7MCY19, PSMC/INDU/HCAR sales offtake receded -14/-8/-32%YoY.

The only catalyst on the horizon seems to emerge from new model launches, where INDU is on track to launch the Vios to replace the 1,300CC Corolla. Planning to accommodate any pickup in demand, the OEM is slated to complete its expansion during a similar timeframe, providing significant runway for bottom-line growth.

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