· COVID-induced global shortage of semiconductors has kept the automotive supply chain disrupted, leading to global and local OEMs curtailing their production.

· Even though the expected surge in demand (CY21-25 CAGR of 10%) for this precious component has made the manufacturers to go in the expansionary phase, we expect the shortage to persist in medium term as expansion take time to come online.

· We expect cumulative volumes of INDU, PSMC, and HCAR to stay flat in CY22 due to persistent shortage in addition to fiscal and monetary measures targeted to slash the demand. However, profitability of AKD Auto Universe is slated to grow by 23%YoY on account of better margins.

· We remain bullish on Autos due to i) order books stretching 3-6 months, ii) resumption of IMF program to bring stabilization to PkR-US$ parity, and iii) reversal in global commodity upcycle due to tightening monetary stance by US Fed and other developed nations. Our top pick for the sector remains INDU (TP: PkR1,675/sh), upside of 28% and DY of 13%, due to better supply chain management and mounting farmers’ income.

Courtesy- AKD Research