Pakistan Auto sales continue to post improvement in Dec’20

The Auto sector is back in business due to lower cost of financing, upbeat demand, stable ex-factory prices and overall economic recovery as the 6MFY21 unit sales (PC, LCV & SUV) clocked in at 79,954, up 18% YoY. The month of December was filled with different vehicle launches from new entrants, like the Changan Alsvin (Sedan), United Alpha (Hatchback), MG Motors (SUV), Proton X70 (SUV), DFSK Glory Pro (SUV).

All competitively priced with additional features not available in the current market.

Car sales are showing strong recovery: The Passenger vehicle segment unit sales clocked in at 67,026 up 13.4% YoY. This segment constitutes 65% of all auto sales excluding two and three wheelers and is therefore a great indicator of the sector upcycle.

The LCV and SUV segment moved with similar momentum as unit sales were 8,766 and 4,162, up 32% and 134% YoY, respectively. The SUV segment is expected to remain in the limelight as new competitors with international presence have griped the market.

The tractor unit sales inched up by 43% YoY to 21,765 on the back on improving farm economics and agricultural package. The bus and truck segments were the only segments that declined slightly to 297 and 1,650 units, down 20% and 3% respectively. The two and three-wheeler segments held onto the auto industry momentum and posted units sales of 924,801 and 26,070, up 18% and 45% respectively.

Listed players in the spotlight: Looking at the major winners in 1HFY21; INDU and HCAR unit sales increased to 26,139 and 13,666, up 84% and 68% YoY, respectively. PSMC felt major resistance as its sales dropped to 37,936 units, down 15%, YoY. On the agricultural front, MTL sales increased to 15,538 units, up 68%, YoY. While the competitor, AGTL only managed to increase its sales to 6,198 units, up 5% YoY. Other heavy vehicle players were not as lucky and witnessed decline in sales. GHNI and HINO sales dipped to 1,013 and 443 units, down 11% and 51% YoY, respectively. The two and three-wheeler players enjoyed a fruitful year with SAZGAR and ATLH sales at 7,021 and 618,040 units, up 47% and 20% YoY, respectively.

Future outlook: The Auto sector is expected to remain upbeat in 2HFY21 with total FY21 sales (PC, LCV & SUV) reaching as high as 166k, up 49% YoY. Our top picks in the Auto sector are INDU, HCAR and MTL with a Dec’21 TP of PKR/sh 1,587, 388 and 1,250, respectively. Major risk to our thesis include adverse Auto policy, PKR devaluation and hike in policy rate.

Report credit goes to BMA Capital Management Ltd.

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