Auto sector sales in Oct’13 have clocked in at 9,955 units – AKD Research
By: AKD Securities Limited
Auto sector sales in Oct’13 have clocked in at 9,955 units, higher by 6%YoY but lower by 11%MoM. Considering auto financing continues to rise (+20%YoY/3%MoM to PkR53.6bn), we attribute sequentially lower sales by OEMs to competition faced from imported variants, particularly as local assemblers have recently raised product prices. Relatively weak Oct’13 sales bring 4MFY14 industry volume offtake to 42,796 units, up by 7%YoY with major impetus provided by HCAR (4MFY14 sales up by 34%YoY). On the tractors front, while combined 4MFY14 sales are lower by 41%YoY, sales increased by a sharp 88%MoM to 3,292 units. This is explained by movements in GST which was 5% last year, 10% at present and is expected to rise to 17% from Jan’14, with sequential tractor sales largely driven by pre-buying in our view. Going forward, while the awaited launch of new models/AIDP can be key catalysts, imported competition continues to pose threats particularly as the IHC has suspended the earlier judgment which declared the auto amnesty scheme illegal. At current levels, our top pick in the Auto space is INDU (TP: PkR400/share).
Weakest month FYTD for Autos: Oct’13 auto sales have clocked in at 9,955 units, up by 6%YoY but lower by 11%MoM to clock in at their lowest monthly level FYTD. As a result, 4MFY14 industry sales have come in at 42,796 units, up by 7%YoY. Tractor sales increased by 88%MoM to 3,292 units, largely due to pre-buying in our view. Company wise breakdown for the sales volumes are given below:
PSMC: Oct’13 sales clocked in at 5,556 units, up by 9%YoY but down by 12%MoM as the sequential growth in Cultus sales (+14%MoM to 1,258 units) failed to counter lower sales for the Swift (-26%MoM to 361 units) and Mehran (-25%MoM to 1,972 units) variants. As a result, PSMC’s cumulative 4MFY14 volumes were recorded at 23,522 units, up by just 3%YoY. We intend to revise our investment case for PSMC post release of detailed 9MCY13 accounts.
INDU: Oct’13 sales of the company came in at 2,595 units, broadly at par with the previous month. Similarly, 4MFY14 sales were recorded at 11,014 units, also flat on a YoY basis. On an individual product basis, Corolla sales were recorded at 2,266 units up by 7%MoM while Hilux sales dropped by 35%MoM to 299 units. Fortuner sales clocked in at just 30 units in Oct’13, some distance away from its sales run rate of 200+ units per month upon launch. INDU is our top pick in the Pakistan auto space where our TP of PkR400/share offers 19.6% upside.
HCAR: The company recorded disappointing sales volumes of 1,720 units in Oct’13, higher by 8%YoY but lower by 22%MoM. In this regard, while City sales remained above the 1,000 unit mark in the month under review, Civic sales dropped by 30%MoM to just 716 units.
Sequentially higher tractor sales: Tractor sales increased by 88%MoM to 3,292 units, largely due to pre-buying in our view with GST set to increase to 17% from Jan’14, up from 10% at present. Sales of AGTL in Oct’13 came in at 1,810 units, 3x higher sequentially but still lower by 23%YoY. Similarly, sales for MTL rebounded by 31%MoM to 1,482 units but this was still lower by 56%YoY.
Outlook: Going forward, while the awaited launch of new models/AIDP can be key catalysts, imported competition continues to pose threats particularly as the IHC has suspended the earlier judgment which declared the auto amnesty scheme illegal. This may serve to subdue sales for domestic OEMs across the next few months. Within this backdrop, we prefer INDU (TP: PkR400/share) underpinned by its relatively resilient products.