Discuss PSX Sector - Automobile Assemblers

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Apr 11, 2017
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#81
Pakistan Automobiles: Pakistan Autos – All roads lead to Indus Motors


13 June 2018
EFG Hermes Pakistan Limited




  • Pakistan’s auto sales numbers for May-18 have just been released (+5% Y-o-Y; up 16% YTD). On the face of it, these were weak numbers vs. growth in previous months – but within the three large manufacturers, Indus (our top sector pick) significantly outperformed its peers (+20% Y-o-Y). Also, the recent pull-back in valuation is creating a good opportunity to increase/add exposure to Indus (Buy – TP: PKR2,172), in our view. We highlight that the sector now trades at a T12m P/E of 8.6x vs. its LT average of 10x. Indus's share price is already pricing in a relatively weak earnings outlook in our view (refer to the last table), at a calendarised 2018e P/E of 7.9x.
  • May-18 sales were up 5% Y-o-Y (-15% M-o-M), a marked slow-down as the 3-month moving average has now moved down to 17% vs. 21% Y-o-Y during the previous month. HCAR volumes declined 9% Y-o-Y, driven primarily by a 43% Y-o-Y decline in Honda BRV sales – in the same month last year, BRV sales were exceptionally strong, since it had just been launched. PSMC also reported a relatively moderate 5% Y-o-Y sales growth – currently, we do not have an insight into what caused this slow-down, but it could potentially relate to i) production issues (production was down 9% Y-o-Y and 19% M-o-M), and/or ii) negative impact from used imports coming back into the market after the small regulatory bottle-neck they faced at the beginning of the year (monthly sales numbers tend to be quite volatile). The most encouraging performance was posted by Indus Motor Company, with volumes up 20% Y-o-Y, with improvement across all three products – Corolla, Hilux and Fortuner volumes were up 11%, 22% and 350% Y-o-Y, respectively (also highlights its improving mix towards the higher priced models).
 
Apr 11, 2017
709
1
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#82
Automobile Assembler: Auto sales grow 5% YoY during May2018, INDU outperforms sector


13 June 2018
JS Global Capital Limited




  • 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
 
Apr 11, 2017
709
1
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#83
Automobile Assembler: May’18: Ramadan & higher prices slow down industry growth


13 June 2018
Taurus Securities Limited




  • PAMA released its off-take numbers for May’18 where the country’s locally assembled cars & LCVs sales volume recorded an increase of 5%YoY to 21,813 units. However, off-takes declined by 15%MoM owing to i) recent price hikes by OEM’s and ii) lesser working hours during Ramadan. The YoY performance (+1,093 units) is largely driven by INDU’s sales jumping on the back of its paint shop de-bottlenecking (+981 units YoY). Further, as previous changes in import procedures got reverted back, it has resulted in tepid growth for PSMC (+5%YoY), the market leader.
  • During May’18, PSMC volumes showed a modest 5%YoY growth coupled with INDU displaying a handsome 20%YoY rise in output. While, HCAR depicted a 9%YoY fall in volumes. Further, growth was also witnessed in LCV off-take, as they increased by 11%YoY in May’18 to 3,590 units against 3,242 units in May’17 amid i) a 3.5x YoY uptick in Fortuner sales (+395 units YoY), and ii) 22%YoY (+130 units YoY) increase in Hilux off-take.
  • Tractor sales continue to perform well registering a handsome dispatches of 6,753 units for the month, up by 19%YoY against 5,663 units in the SPLY. Main supports to the segment were offered by MTL & AGTL, which increased their sales volume by 22/13%YoY. We attribute this jump to reduced GST rates & improving agronomics.
 
Apr 11, 2017
709
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#84
Automobile Assembler: May'18 sales exhibiting signs of weakness


13 June 2018
AKD Securities Limited




  • Monthly PAMA data reads total industry sales at 22,719units for May’18 (+5.05%YoY), showing signs of weaknesses on the back of Holy Month, with reduced working hours and production-side constraints (May’18 production down 5.5%/6.0/18.6% for INDU/HCAR/PSMC), closing 11MFY18 total industry sales at 249,308 units (+21.3%YoY). While Passenger Car sales clocked in at 18,223 units (-15.4%MoM/+4.3%YoY), PSMC lost major ground (-21.2%MoM) displaying signs of weakness across with Cultus sales slumping (-32.3%MoM/29.8%YoY) on the back of fulfillment of corporate orders for the OEM, and channel checks suggesting an ongoing assembly line upgradation. That said, passenger car sales were down -15.4%MoM, 1000CC/800CC & below segment plummeted, falling 19.9%/23.9%MoM. With 11MFY18 cumulative total industry sales nearing ~250K units mark (soaring past FY17 cumulative sales of 221,747), FY18 is expected to cross the finish line with heft. As INDU’s expansion activity close to fruition (Jun’18 expected on-boarding); lifting capacity to 75K units, and possible stratification of Corolla (adding fuel to fire-up additional capacity - expectations detailed in previous notes), INDU remains our top pick with a DCF based TP of PkR2,192/sh., calling for 50% upside from the current price levels.
  • The OEM’s sales sizably dipped with major block of corporate orders fulfilled leading May’18 sales to clock-in at 11,651 units (-21.2%MoM yet +4.7%YoY), taking 11MFY18 sales to 133,726 units (+27.3%YoY). The outgoing month remained a weak spot for across-the-board offerings, segment sales weakened -32.3%/-24.4%/-23.5%/-17.5%/-16.9%/-11.5%MoM for Cultus/Bolan/Mehran/Swift/Ravi/Wagon-R. In this regard, our channel checks indicate assembly line upgradation as a dampener to production for the outgoing month. With 11MFY18 sales still standing strong, the major propellants for the 11MFY18 sales have been Wagon-R/Cultus/Mehran/Ravi with +65.7%/25.5%/22%/21.7%YoY, while Swift/Bolan also remained strong for the period with growth of 17.9%/12.2%YoY.
 
Apr 11, 2017
709
1
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#85
Automobile Assembler: Automobiles May sales dip 15% MoM, 11MFY18 still ahead of last year


13 June 2018
Aba Ali Habib Securities (Private) Limited




  • Sales of new vehicles (Cars & LCVs) fell by 15% in May compared to last month. A total of 21,813 vehicles were sold, down 15% from the Apr-18 total of 25,567, but well ahead of 20,720 units of May-17.
  • A budgetary measure of restraining non-filer from the purchase of new vehicles, increase in vehicle prices due to rupee devaluation and continuous of upward trend in the import of used vehicles are the main culprit behind the monthly decline in auto sales. 11MFY18 auto sales clocked in at 201,134 units up 16% from last year’s sales of 173,438 units.
  • The reason behind 21.2% MoM dip in PSMC sales was due to 32.3% MoM decline in Cultus sales followed by 24.4% and 23.5% MoM decline in sales of Bolan and Mehran. However, PSMC posted 4.7% YoY growth.
 
Apr 11, 2017
709
1
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#86
Automobile Assembler: May’18: Auto Sales Plunged by 15% MoM


13 June 2018
Arif Habib Limited




  • PAMA released auto data for the month of May’18 with total car sales clocking-in at 21,813 units (including LCVs + 4x4s), depicting a growth of 5% YoY and down by 15% MoM, respectively. This slowdown in car sales is due to i) higher car prices as companies raised car prices for the third time during FY18TD on account of PKR depreciation against USD, ii) Ramzan factor, and iii) resumption of import of used and new cars through personal transfer or baggage scheme. In the 1300cc and above category, sales displayed a meagre drop of 7% MoM while they were up by 7% YoY to 8,865 amid 11% YoY uptick in sales of Toyota Corolla. In the below 1,000cc category, Mehran sales registered an increase of 5% YoY and decline of 23% MoM to 3,557 units. On a monthly basis, Toyota Hilux remained the only car which managed to post a growth of 2% MoM as demand for Hilux increases during elections which scheduled for 25th July’18.
  • During May’18, auto sales registered a decline of 15% MoM while posted growth of 5% YoY to 21,813 units. The decline in sales was attributable to Ramzan factor and PSMC was most affected as its car sales plunged by 21% MoM to 11,651 units. Similarly, HCAR’s sales went down by 9% YoY and 8% MoM to 4,252 units. However, only INDU managed to post a manageable growth of 20% YoY to 5,910 units as Toyota Hilux supported overall volumes due to election year along with higher production capacity compared to last year. Tractor sales increased by 19% YoY but declined by 15% MoM to 6,753 units. During the month, MTL and AGTL sales witnessed a growth of 22% YoY and 13% YoY to 4,165 units and 2,505 units, respectively.
 
Apr 11, 2017
709
1
18
#87
Pakistan Automobiles: Meagre increase amid holy month


13 June 2018
Foundation Securities (Pvt.) Limited




  • As per the latest stats by PAMA, auto (PC+LCVs) sales grew by 5% YoY in May-2018 taking 11MFY18 sales growth to 21% YoY. Passenger cars (including LCVs) have been on the rise in past 10 months largely attributed to (1) increased car financing, (2) better response to taxi hailing apps and (3) higher infrastructure spending. However, the growth in May-18 is the lowest since Jul-17, backed up by factors including restriction on non-filers to buy a new vehicle as well as the month of Ramadan slowing down the demand. On MoM basis, the stated decline is 15% owing to above mentioned factors
  • PSMC posted 2nd lowest growth in 11M in May18 (5% YoY growth taking 11MFY18 sales growth to 27% YoY) largely as a result of factors mentioned above.The 1000cc segment, which has been on an extraordinary run this year (↑46% 11MFY18) showed slowdown with a 4% growth YoY. Wagon R (↑40%/66% YoY in May-18/11MFY18) and the Suzuki’s classic product Mehran (↑5%/22% YoY in May-18/11MFY18) led the company.
  • HCAR’s sales have been remarkable in past 10 months (↑32% YoY in 11MFY18). Civic/City showed decent sales growth (↑23%/14% in Mar18/9MFY18). However the YoY decline witnessed in May-18 (↓9%) is likely a factor of Ramadan effect and closure of booking of non-filers. We are mild about HCAR’s volumetric growth as INDU would most likely pick up sales due to debottlenecking that would have come online by now.
 
Apr 11, 2017
709
1
18
#88
Automobile Assembler: New entrants to increase industry capacity by more than 60%


14 June 2018
JS Global Capital Limited




  • With the new Auto Policy, there has been a flurry of new entrants looking to benefit from the incentives offered under the policy ambit and from booming local auto demand.
  • We attempt to provide information on the new entrants entering the local space, including planned capacities, expected investments and estimated time of commencement of operations
  • So far, eight companies have been granted Greenfield status, while two companies have been allowed Brownfield status under the new Auto Policy.
  • We believe existing OEMs can likely employ a strategy of product diversification in order for them to protect their market share.
 
Apr 11, 2017
709
1
18
#89
Pakistan Automobiles: Exceptional growth by the sector in 11MFY18


20 June 2018
Azee Securities (Pvt.) Ltd.



  • The Pakistan Automotive Manufacturers Association (PAMA) recently released the data of automobile sales and production for May'18 which showed that the automobile sales (Car, LCV, & Pickup) in the country remain robust during the period.
  • Overall auto sales (Car, LCV & Pickup) posted growth of 21% to settle at 240,114 units in 11MFY18 against auto sales of 197,657 units in 11MFY17 mainly due to higher demand and better farmer income. Likewise, auto production too remained higher during the period as the cumulative production of Car, LCV & Pickup reached 242,082 units in 11MFY18 compared to 201,871 units in 11MFY17, depicting rise of 20%.
  • While comparison on MoM basis during May'18, sales down by 15% to 21,813 units versus 25,567 units in April'18 due to Ramadan effect. Similarly, production dips by 12% MoM to 20,288 units versus 23,182 units in April'18 on account of reduced working hours in Ramadan.
  • We expect decline in sales growth of auto sector due to weakening economic indicators on account of higher current account deficit and depreciating Pak Rupee. Furthermore, recent budgetary measures to banning purchase of new vehicles to non-filers would also hurt volumes.
 
Apr 11, 2017
709
1
18
#90
Automobile Assembler: Overreaction warrants revisit!


28 June 2018
BMA Capital Management Limited




  • We dig down on possible scenarios on auto sales to analyze whether the emerging risk on auto sales warrants significant underperformance of 14% in BMA auto universe since the budget announcement.
  • To recall, Budget FY19 barred non-filers from buying new cars from 1-July’18, where industry estimates suggest that non-filers contribute 40-45% of automobile sales.
  • Our analysis suggests market is incorporating a worst-case in terms of volumes and margins outlook in FY19.
 

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