Pakistan’s auto sector saw a strong start in January 2024

The automotive industry started the year robustly, seeing an 81% MoM increase in sales, totalling 10,536 vehicles for the month. However, despite this strong sequential performance, sales were down 5% YoY. This brings total industry sales for 7MFY24 to 49,990, representing a 48% decrease compared to the same period last year. Production followed a similar trajectory, growing by 52% MoM, suggesting continued strong demand in the coming months. Truck sales experienced a significant surge of 138% MoM, likely driven by increased demand due to axle load implementation. Additionally, tractor demand showed signs of recovery after three consecutive months of decline, indicating that farmer incomes remain healthy. 

§  INDU: Toyota experienced the most significant sales increase among its peers, with sales surging by 304% MoM, although still down by 23% YoY. The company sold 2,762 vehicles for the month. The notable recovery in total sales can be partially attributed to Corolla Cross, which drove strong sales in Toyota’s passenger car segment (including Corolla, Yaris, and Cross), up 287% MoM and 25% YoY. Additionally, Toyota’s Jeeps & Pickup segment (including Fortuner and IMVs) also performed admirably, increasing by 376% MoM. However, the 67% YoY decline remains a concern.

§  PSMC: The company maintains its momentum with robust sales numbers, showing a 22% MoM increase and a 54% YoY growth. It’s worth noting that unlike its peers, PSMC not only outperformed them on a YoY basis but also delivered strong numbers last month while its competitors faced double-digit declines in sales, showcasing robust consistency. The Alto and Swift were the primary products driving these sales. Encouraging Swift sales bode well for the company’s margins in the future.

§  HCAR: In line with its counterparts, HCAR reported promising sales figures, increasing by 49% MoM but remaining down by 50% YoY. The notable boost in HCAR’s sedan portfolio (up 53% MoM) played a pivotal role in its improved sequential performance.

§  The tractor industry: Following three consecutive months of decline, tractor sales rebounded in January 2023, showing a 49% MoM increase and a 12% YoY recovery. This brings tractor sales for the first seven months of FY24 to 27,225, marking an impressive 82% YoY increase. AGTL nearly doubled its sales during the quarter, consequently enhancing its market share by 7ppt to 26%; however, MTL maintained its position as the market leader.

Auto sales for January 2024 were promising, but the sustainability of this trend in the coming months is uncertain. Expected monetary easing this year is anticipated to bolster sales recovery; however, any delays in interest rate cuts or PKR volatility could have a negative impact on the sector. Despite these potential challenges, we continue to prefer INDU as the top pick in the sector, primarily due to the successful launch of Corolla Cross, which significantly boosted sales volumes this month and is expected to continue doing so in the future. Our target price for the stock is PKR1,640/sh.


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