During Apr ’20, Pakistan’s auto industry sales stood at only 39 units thus pushing 10MFY20 auto sales to 98,449 units, down 52%, YoY, attributable to countrywide lockdown in place following outbreak of coronavirus (COVID-19).

Only two tractor assemblers, AGTL & MTL posted modest sales – 2,035 units cumulatively sold in Apr ’20, down 63%, YoY, and lower by 30%, MoM – on the back of rising tractor demand due to wheat harvest and upcoming fruit and vegetable seasons.

We foresee this situation of auto sales continuing during May ’20 albeit with some improvement following the decision of the govt to lift the COVID-19 related lockdown in phases from May 09, 2020. We anticipate auto sales volumes remaining low during CY20 amidst COVID-19 related lockdown and uncertain economic conditions. This is bound to negatively affect earnings of auto assemblers.

We are, however, bullish on INDU with a Dec 2020 Target Price of PKR1,348/- (employing DCF Valuation) implying that the stock is offering a 45% capital upside at its last closing price of ~PKR950.50. (AL Habib Capital Markets (Pvt) Ltd.)