By: InterMarket Securities Limited
Pakistan Autos: Local auto manufacturers continued their dream run in FY15 with combined sales of 151,134 units (+28%YoY) and GMs of 13% (+4ppt YoY) on the back of JPY weakness and stability vs. the US$. Combined profits of INDU/PSMC/HCAR clocked in at PkR5.25bn for 4QFY15 (+89%YoY), bringing FY15 profits to PkR14.4bn (+128%YoY).
FY16F has kicked off in style; combined Jul’15 sales have clocked in at 13,013 units (+120%YoY); individually, sales were up 119%YoY for INDU, 285%YoY for PSMC and 45%YoY for HCAR. Provided margins remain stable, strong underlying demand underpinned by accelerating auto finance (+33%YoY in Jul’15) should result in another strong showing in FY16F.
The IMS Auto Universe has gained 25%CYTD outperforming the KSE-100 by 18% in the process to trade at a CY16F P/E of 11x (1.7% premium to broader Index). Future price performance is a function of: (i) new Auto policy and (ii) global currency movements, where we prefer players with room on capacity utilization (PSMC, HCAR). That said, we do not rule out a capacity expansion by INDU going forward.