Karachi, November 05, 2018 (PPI-OT): Automobile Assemblers – Offtakes for Oct-18 Likely to go through the Roof
As per our channel checks, sales of Passenger Cars during Oct-18 are expected to clock in at 24,200 units (up 25%MoM/4%YoY). We however expect this growth to be a one-off event, likely on the back of front-loading of purchases in anticipation of aggressive price increases from November onwards.
During 4MFY19, total sales for passenger cars are expected to clock in at 82,760 units (down 1%YoY).
Recall that with the recent round of PKR depreciation in Oct-18, Indus Motors (INDU) and Honda Atlas Cars (HCAR) announced additional price increases that will be applicable in two rounds (for INDU, average price hike for Nov/Dec-18 and Jan-19 onwards deliveries: PKR50-175k and PKR100-350k and for HCAR, average price hike for Nov/Dec-18 and Jan-19 onwards deliveries: PKR50-100k and PKR100-210k, respectively). Pak Suzuki Motors (PSMC) has jacked up the prices of Wagon R, Cultus and Swift by PKR40k (with effect from Nov-18) while more increases may be announced later.
Amongst the assemblers, INDU is expected to show the highest growth of 30%MoM/25%YoY. The YoY increase can partially be attributed to enhanced capacity (debottlenecking) and changing sales mix of the company (converging back towards Corolla vs. high end products earlier). The MoM rise is in-line with the industry wide theme of pent-up demand. Moreover, expected discontinuation (management is yet to confirm) of Toyota Corolla 1.3L may also be leading to increased bookings of this variant by customers and dealers.
HCAR and PSMC are expected to register growths of 11%MoM and 29%MoM, respectively. During 7M-MY19, HCAR’s sales are projected at 30,935 units, up 10%YoY (note: HCAR Financial Year ends in March).
We maintain Underweight stance on the sector on the back of ongoing weakness in PKR, expected slowdown in demand, interest rate lift-off, restriction of vehicle purchase by non-filers, and upcoming entry of new players.