JS Securities Limited – Morning Briefing

Karachi, June 13, 2018 (PPI-OT): Auto sales grow 5% YoY during May-2018, INDU outperforms sector

Auto sales (Passenger Cars + LCVs) during the month of May-2018 grew by 5% YoY, slower when compared to 21% YoY during 11MFY18.

Auto sales slowdown closely followed sluggish performance of the market leader, Pak Suzuki Motor Company (PSMC), which also witnessed 5% YoY growth during the month.

Honda Atlas Cars (HCAR) saw volumes declining 9% YoY, mainly owing to 43% YoY decline in BR-V sales.

Indus Motor Company (INDU) was the standout performer during the month, with volumes surging by 20% YoY, compared to 4% YoY growth during 11MFY18.

Volumes up 5% YoY in May-2018, PSMC growth subsides

Auto sales for the month of May-2018 witnessed growth of 5% YoY, with sales of 21,813 units (Passenger cars and LCVs), in-line with our expectations. However, sales growth was considerably slower in comparison to 11MFY18 growth of 21% YoY for the sector.

As estimated in our earlier report, sector growth followed the slowdown in its largest contributor, namely Pak Suzuki Motor Company (PSMC, ~50% of auto volumes), which depicted 5% YoY growth during the month. All the company’s variants – barring Swift, which provides ~4% of PSMC’s volumes – experienced shrinking growth rates, with Cultus (down 30% YoY) and Bolan (down 9% YoY) recording declines during the month. We attribute the weak performance of PSMC to the price elastic nature of its target market, which reacted to the recent price increases by the company. Additionally, the company would likely also have suffered from the resumption of used imports, in our view, considering majority of used imports are in the small car segment, i.e. PSMC’s major market. Honda Atlas Cars (HCAR) underwent a 9% YoY decline in volumes, where BR-V volumes fell 43% YoY during the month, while combined Civic and City sales shrank by 1% YoY. As mentioned in our earlier report, we expected a decline in BR-V sales, owing to lackluster demand for the car, which has generally been viewed as overpriced as per our conversations with the company’s dealer network.

Fortuner growth lifts INDU sales

Indus Motor Company (INDU) was the standout performer during the month, with volumes surging by 20% YoY, compared to 4% YoY growth during 11MFY18. As has been the recent trend, Fortuner sales helped add the ‘oomph’ factor to the company’s volumes, displaying 350% YoY growth during the month, fueled by new variants. Corolla sales were also stronger with 11% YoY growth (11MFY18 Corolla volumes down 4% YoY), the highest growth since Nov-2015 for the company’s flagship brand.

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JS Securities Limited – Morning Briefing

Karachi, June 13, 2018 (PPI-OT): Auto sales grow 5% YoY during May-2018, INDU outperforms sector

Auto sales (Passenger Cars + LCVs) during the month of May-2018 grew by 5% YoY, slower when compared to 21% YoY during 11MFY18.

Auto sales slowdown closely followed sluggish performance of the market leader, Pak Suzuki Motor Company (PSMC), which also witnessed 5% YoY growth during the month.

Honda Atlas Cars (HCAR) saw volumes declining 9% YoY, mainly owing to 43% YoY decline in BR-V sales.

Indus Motor Company (INDU) was the standout performer during the month, with volumes surging by 20% YoY, compared to 4% YoY growth during 11MFY18.

Volumes up 5% YoY in May-2018, PSMC growth subsides

Auto sales for the month of May-2018 witnessed growth of 5% YoY, with sales of 21,813 units (Passenger cars and LCVs), in-line with our expectations. However, sales growth was considerably slower in comparison to 11MFY18 growth of 21% YoY for the sector.

As estimated in our earlier report, sector growth followed the slowdown in its largest contributor, namely Pak Suzuki Motor Company (PSMC, ~50% of auto volumes), which depicted 5% YoY growth during the month. All the company’s variants – barring Swift, which provides ~4% of PSMC’s volumes – experienced shrinking growth rates, with Cultus (down 30% YoY) and Bolan (down 9% YoY) recording declines during the month. We attribute the weak performance of PSMC to the price elastic nature of its target market, which reacted to the recent price increases by the company. Additionally, the company would likely also have suffered from the resumption of used imports, in our view, considering majority of used imports are in the small car segment, i.e. PSMC’s major market. Honda Atlas Cars (HCAR) underwent a 9% YoY decline in volumes, where BR-V volumes fell 43% YoY during the month, while combined Civic and City sales shrank by 1% YoY. As mentioned in our earlier report, we expected a decline in BR-V sales, owing to lackluster demand for the car, which has generally been viewed as overpriced as per our conversations with the company’s dealer network.

Fortuner growth lifts INDU sales

Indus Motor Company (INDU) was the standout performer during the month, with volumes surging by 20% YoY, compared to 4% YoY growth during 11MFY18. As has been the recent trend, Fortuner sales helped add the ‘oomph’ factor to the company’s volumes, displaying 350% YoY growth during the month, fueled by new variants. Corolla sales were also stronger with 11% YoY growth (11MFY18 Corolla volumes down 4% YoY), the highest growth since Nov-2015 for the company’s flagship brand.

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