IGI Securities Limited – Day Break

Karachi, December 12, 2017 (PPI-OT): Automobile Assembler – Nov-17: Decline in monthly sales volume by 9%MoM to 178k units

As per latest data released by Pakistan Automotive Manufacturers Association (PAMA), industry sales decreased by 9%MoM (+4%YoY) to 178k units owing to seasonal impact as the year end approaches. Segment wise, major decline of 20%MoM was witnessed in sales of 3/W to 6.4k units followed by passenger car segment also down by 11%MoM to 17.2k units.

With respect to company wise sales, INDU showed positive growth level of 4%MoM to 5.4k units while HCAR sales volume remained stable at 4.5k units. PSMC, however, witnessed declining growth levels (18%MoM) in its sales volume tuning at 11.3k units.

We maintain a “BUY” call on INDU with Dec-18 based target price of PKR 2,244.7/share, offering +34% upside. The company is currently trading at FY18E P/E of 9.1 x and offers a dividend yield of 7.7%.

All segments suffered declining sales; volumes down by 9%MoM to 178k units

As per latest data released by Pakistan Automotive Manufacturers Association (PAMA), industry sales decreased by 9%MoM (+4%YoY) to 178k units owing to seasonal impact as the year end approaches. Segment wise, major decline of 20%MoM was witnessed in sales of 3/W to 6.4k units followed by passenger car segment also down by 11%MoM to 17.2k units. Sales of tractors however remained stagnant at 5.6k units. Within passenger car segment, sales of =(greater than) 1300 cc engine category remained relatively stable at 8k units while 1000 (less than) x (less than) 1300 cc engine category witnessed decline in sales volume by 30%MoM to 3.5k units. Similarly, 800 (less than) x (less than) 1000 cc also followed the trail slashing by 12%MoM to 5.7k units.

Mixed growth levels exhibited in OEMs volume – INDU showing positive growth

With respect to company wise sales, INDU showed positive growth level of 4%MoM to 5.4k units while HCAR sales volume remained stable at 4.5k units. PSMC, however, witnessed declining growth levels (18%MoM) in its sales volume tuning at 11.3k units. Taking into account 5MFY18, total sales jumped by 21%YoY to 87.2k units supported by new model launches in 1000 (less than) x (less than) 1300 cc engine category.

HCAR: BRV showing healthy sales trend, suppressing decline in overall sales volume

For HCAR, BRV sales volume showed healthy growth levels of 14%MoM to 1.2k units offsetting the decline (9%MoM) witnessed in Civic and City. As a result, volumetric sales stabilized at 4.5k units. On cumulative basis, sales for five month period clocked in at 21.6k units (+94%YoY) supported by BRV addition in the portfolio.

INDU: Corolla rescuing overall sales volume amid decrease in Hilux/Fortuner sale

INDUs volume climbed by +4%MoM to 5.4k units, rescued by +8%MoM growth in Corolla volumes (4.5k units) despite witnessing declining sales of Hilux/Fortuner by 17%/6%MoM to 279/534 units. Overall sales volume for 5MFY18 stands at 25.6k units, up by +39%YoY. Moreover, we expect sales of Fortuner to recede further with the new variant (2GD engine) launch expected from Jan-18 onwards.

PSMC: Drop in sales across all variants resulting in sales volume of 11.3k units

PSMC witnessed a volumetric decline of 18%MoM to 11.3k units across all variants, wherein sales of Wagon R collapsed by 39%MoM to 2.1k units, followed by a drop of 19%MoM in sales of Bolan to 1.8k units. Sales of Cultus/Mehran descended by 7%/9%MoM to 1.3/4k units for the month of Nov- 17. The 2/wheeler segment continued to show steady sales volume, maintaining at 1.7k units. To sum up, the overall sales for 5MFY18 jumped up by +69%YoY to 57.7k units led by an upsurge in sales of Wagon R/ Cultus/Bolan.

Recommendation

We maintain a “BUY” call on INDU with Dec-18 based target price of PKR 2,244.7/share, offering +34% upside. The company is currently trading at FY18E P/E of 9.1 x and offers a dividend yield of 7.7%.

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