Auto industry sales totaled 9,379, declining by 3% MoM and 1% YoY. This brings 9MFY24 sales to 69,078, reflecting a 38% YoY contraction. Car production also experienced a downturn, dropping by 9% MoM, potentially indicating weak demand in the coming months. Additionally, INDU’s 6-day plant closure during the month may have impacted production figures.
INDU: The company’s monthly sales figures fell for the second consecutive month, declining by 16% Month over Month. The decline in sales is due to the luxury segment (Fortuner and IMVs) continuing to lag, declining by 43% Month over Month. This will likely hurt margins in 3QFY24.
PSMC: The company’s sales declined 16% Month over Month and 27% Year over Year. Swift displayed the weakest performance, declining by 79% Month over Month. PSMC’s unwillingness to reduce prices may have started to impact demand; however, higher margins will likely continue to bolster the bottom line.
HCAR: The company saw a 44% MoM and 162% YoY surge in sales, primarily driven by sedan sales. BR-V and HR-V also showed robust growth sequentially. However, the absence of any Honda SUV production during the month signals diminishing demand, underscoring the company’s weakness in that segment.
In the tractor industry, tractor sales reached 4,608, marking an increase of 37% MoM and 54% YoY. This brings 9MFY24 sales to 35,199, up 66% YoY. The strong growth in this segment indicates that Pakistan’s agricultural sector remains a bright spot in an otherwise challenging macroeconomic environment. MTL outperformed AGTL sequentially, with a 40% sales increase compared to AGTL’s 31%.
The auto industry continues to grapple with a challenging landscape amid elevated interest rates and high inflation. The trend of rising CBU imports persists; they are up 7.8x YoY in 1HFY24. Current industry utilisation stands at approximately 22%. However, demand is expected to gradually rebound with easing inflationary pressures and the onset of monetary easing. Our preferred choice remains INDU, owing to its robust balance sheet, investments in high localisation of HEVs, and strong Toyota brand name. We maintain a target price of PKR1,910/sh.
Courtesy – IMS Research