Pakistan’s Auto industry sales witnessed 3% mom growth in Nov 20

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In November 2020, the Auto industry sales witnessed 3% mom growth (up 48% yoy) to 14,533 units, largely attributed to the rise in the Pickup segment sales, which rose by 39% mom. For the Auto OEMs, PSMC witnessed a 12% mom rise in sales (16% yoy), while INDU dragged the industry’s growth due to the 10% mom decline (fall in Yaris sales). This takes 5MFY21 industry sales to 65,998 units, up 19% yoy.

INDU sold 1,704 units / 2,338 units of Corolla / Yaris, down a combined 8% mom, due to the sharp 24% mom fall in Yaris sales (Corolla sales up 30% mom). We believe that the decline in Yaris volumes can be attributed largely to the ongoing congestion in Asian ports, which has led the company to ship parts by air. INDU shut down its plant for three days during the month (and two days in December), due to the supply issue. INDU is set to launch the Corolla Cross CBU and Corolla facelift by January 2021, which may boost sales for the latter, in our view.

HCAR sold 2,237 units in November, with Civic and City sales of 2,088 units, up a staggering 94% yoy and 12% mom. BR-V sales fell a sharp 35% yoy and 60% mom to 149 units.

PSMC’s Cultus sales rose a sharp 86% mom  to 1,517 units, while sales of the Alto and Wagon R declined by 6%/26% mom. The 3.6x mom rise in Ravi sales may be attributed to a pickup in commercial activities, in our view, lifting overall sales for PSMC. With the increase in Cultus and Swift prices earlier in December, we believe margins will improve for PSMC; however, it may also lead to a fall in volumes as the Cultus is now priced higher than the Kia Picanto (average 4% premium).

Tractor industry recorded sales of 3,234 units, up a sharp 77% yoy. AGTL sales rose by a massive 2.2x yoy to 903 units (vs. 418 units SPLY). Sales for MTL were up a sharp 67% yoy to 2,331 units. With the recent notification of GST subsidy, we believe tractor sales will rise from January 2021 onwards (new-year seasonality) and due to improvement in farmers’ income.

Sales for Hyundai clocked in at 472 units in November, compared to 289 units in October, as the Tucson and H-100 Porter sales rose by 76%/29% mom, respectively. The demand for SUVs have seen rising interest since the launch of the Sportage and Tucson. Hyundai sales may have risen due to smoothening out of supply-chain issues, in our view. According to channel checks, we understand that Kia sold roughly 1,500 cars during the month.  

Total industry sales in November clocked in at a 17mth record high of 14,533 units. However, we expect sales to decline in December due to the year-end phenomenon but a noticeable recovery in sales thereafter, particularly as auto-financing picks up. In this backdrop, newer models such as a Honda City, Kia Sorento and Hyundai Elantra (among other entrants) could serve to maintain consumer interest.

We are have a Marketweight stance on the Auto OEMs, while Overweight on Tractor OEMs, with Buy rating on INDU (TP of PKR1,458/sh), MTL (TP of PKR1,330/sh) and AGTL (TP of PKR455/sh).

(Intermarket Securities Limited).

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