Pakistan Automobile Sector sees growth on Jan 21

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The Automobile assemblers rolling momentum continues in Jan ’21 due to lower cost of financing, January registration effect, stable ex-factory prices and strong consumer demand. The 7MFY21 unit sales (PC, LCV & SUV) clocked in at 97,469, ↑23% YoY. With the auto policy 2016-21 expiring in Jul ’21, new entrants race to file applications and benefit. Recently, GHNL has partnered with China’s Chery group to launch electric vehicles in the next three years.

Car sales show a strong recovery in Jan ’21: The Passenger vehicle segment unit sales clocked in at 14,543 up 44/29% YoY/MoM. This segment holds significant weight in defining the entire auto unit sales, excluding two and three-wheelers and is, therefore, a great indicator of the sector upcycle. The SUV segment moved with similar momentum as unit sales were 1,199, up 149/34% YoY/MoM. Likewise, the LCV segment witnessed 28% YoY uptick to post 1,773 unit sales due to rebounding business activity.

The tractor unit sales inched up by 135/57% YoY/MoM to 5,209 on the back of improving farm economics and agricultural package. However, the truck segments declined by 26% YoY to 290 units, while buses witnessed an uptick of 51% YoY & QoQ to 73 teams. The two and three-wheeler components held onto the auto industry momentum and posted units sales of 162,564, up 14/3% YoY/MoM, respectively.

Listed players in the spotlight: All significant players benefited from the sector upcycle in Jan ’20; PSMC, INDU and HCAR unit sales increased to 9,013, 5,452 and 2,450, up 62/19%, 36/36%, 11/39% YoY/MoM, respectively. MTL sales increased to 3,862 units on the agricultural front, up 195/30%, YoY/MoM. While the competitor, AGTL managed to increase its sales to 1,347 units, up 53/290% YoY/MoM. Other heavy vehicle players were not as lucky, GHNI and HINO sales dipped to 155 and 83 branches, down 40/3% and 24/17% YoY/MoM, respectively. The two-wheeler player, AHTL enjoyed sustainable growth with units sales at 114,001 units, ↑20/8% YoY/MoM. Simultaneously, Sazgar witnessed mixed unit sales at 2,007 units, ↓20/↑103% YoY/MoM.

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 1,606, 388 and 1,250, respectively. Significant risk to our thesis includes adverse Auto policy, PKR devaluation and hike in the policy rate.

Courtesy -BMA Capital Management Ltd.

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