AKD Quotidian about — Normalized FY13 auto sales are flat

Karachi, July 11, 2013 (PPI-OT): Total auto sales (Cars and LCVs) in Jun’13 have clocked in at 13,674 units, up 3%MoM.

According to AKD Securities as a result, total sales in FY13 have registered at 135,311 units, down 24%YoY.

That said, excluding the impact of the Punjab Taxi Scheme, FY13 sales represent a decline of 15%YoY while `normalized’ decline tags in at 2%YoY if the impact of the phased-out Alto and Cuore variants is factored in as well.

On a company level, PSMC and INDU have posted sales growth of O.3%MoM and 13%MoM, respectively, while sales for HCAR fell by 4%MoM in Jun’13.

On the Tractors front, sales in FY13 clocked in at 50,593 units, up a contained 2%YoY as Jun tractor sales of 6,237 units were up a robust 42%MoM. Going forward, provided the regulatory environment remains stable with respect to imported vehicles, AKD Securities expects auto sales to grow by 5%YoY – 7%YoY in FY14.

AKD Securities retains preference for PSMC (CYI3F PIE: 6.4x) which offers 16% upside to AKD Securities TP of PkR1 78/share. At the same time INDU, which has underperformed the KSE-100 Index by 22%CYTD, appears to have room for catch-up price performance.
Normalized auto sales are flat: Total auto sales (Cars and LCVs) in Jun’13 have clocked in at 13,674 units, up 3%MoM. As a result, total sales in FY13 have registered at 135,311 units, down 24%YoY (-2%YoY on normalized basis).

The steep reported decline has been driven by i) completion of the Punjab Taxi Scheme, ii) ban on CNG kits and iii) phase-out of the Alto and Coure variants.

Going forward, taking AKD Securities cue from the 35%HoH increase in sales in 2HFY1 3, AKD Securities believes total auto sales will depict growth of 5%YoY – 7%YoY in the new fiscal year provided the regulatory environment remains stable i.e. ban on 3+yrs used imported vehicles stays in place.

On the Tractor front, sales in FY13 clocked in at 50,593 units, up a contained 2%YoY. In this regard, sales for AGTL and MTL grew by 4.5%YoY and 0.1 %YoY, respectively.

HCAR the outperformer in FY13: PSMC’s sales declined by 33%YoY to 75,650 units in FY13. That said, excluding the impact of the Punjab Taxi Scheme, FY13 sales represent a decline of 18%YoY while normalized sales are flat if the impact of the phased-out Alto variant is factored in as well.

Similarly, INDU’s reported FY13 sales of 37,776 units represent a decline of 31%YoY which normalizes to a decline of 25%YoY ex-Cuore.

Even this is fairly steep though, which AKD Securities attributes to lower farmer incomes although the 13%MoM uptick in Jun’13 sales is certainly encouraging. In HCAR’s case, FY13 sales of 21,235 units are up 75%YoY driven by the launch of the new Civic and a low base (halt in production last year due to floods in Thailand).

Investment perspective: With latest data suggesting stock of auto loans is up by 1O%YoY at end-May’13 (at PkR49.3bn), AKD Securities are increasingly optimistic regarding the outlook for auto sales, provided the regulatory environment remains benign.

In this regard, AKD Securities tops pick PSMC (CY13F PIE: 64x) offers 16% upside to AKD Securities TP of PkR178/share. At the same tune INDU, which has underperformed the KSE-l 00 Index by 22%CY1D, appears to have room for catch-up price performance.

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