Pakistan Autos saw recovery momentum during the month of Sep.

The automotive industry continued its recovery in September, experiencing a 10% MoM increase in sales, reaching 8,312 units during the month. However, compared to last year’s period, sales were down by 26% YoY. Lifting LC restrictions played a significant role in enabling the industry to achieve a sales figure of 20,983 units for the first quarter of FY24, reflecting a 31% QoQ increase. Honda showed an encouraging performance during the month, posting a market share of 16% compared to 9% last month.

INDU: Sales volumes increased by 3% MoM, reaching 1,595 units. However, on a QoQ basis, sales declined by 18%, which is expected to hurt 1QFY24 earnings. Shrinking margins may further exacerbate the challenge of weak sales, as the share of the luxury segment in the mix dropped from 48% in the previous quarter to 28% in 1QFY24. Additionally, the weakened PKR during the initial months of 1QFY24 may put further downward pressure on margins.

PSMC: The company’s overall sales remained steady on a MoM basis, with 4,234 units sold in September. Sales of the Alto model experienced a slight MoM decline of 8%, whereas the Ravi and Bolan models saw a strong uptick, increasing by 58% and 38%, respectively. On a QoQ basis, PSMC sales surged by 47%, and the company has greatly benefited from removing LC restrictions.

HCAR: The company maintained its trend of sequential improvement, achieving total sales of 1,342 units for the month. This represented a significant increase of 99% MoM and a modest 5% YoY growth. The improvement was primarily attributed to the sedan segment, which saw an impressive 136% MoM increase, while the SUV segment remained flat.

Tractor industry

The tractor industry maintained its momentum with robust sales, reaching 5,445 units in September, marking a 37% MoM and 153% YoY increase. Both companies displayed strong performance for the month; however, in a QoQ comparison, MTL outperformed AGTL, achieving a QoQ growth of 48% as opposed to AGTL’s 1%. Consequently, MTL’s strong sales figures allowed the company to increase its market share from 50% to 59%.

Auto sales continue to show promise, with supply-side disruptions mostly resolved. However, the big three collectively operated at only 32% of their capacity for the quarter. Demand remains a challenge due to high-interest rates and inflation. The recent recovery in the PKR is a positive development, relieving OEMs from the need to increase prices further to protect margins, which could have impacted demand. At the same time, robust tractor sales signify strong agricultural performance, potentially leading to improved auto sales in the future, particularly for INDU, which relies significantly on sales from rural areas. We maintain a favourable stance on PSMC and INDU, with a target price of PKR160/sh and PKR1,200/sh, respectively.

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