JS Securities Limited – Morning Briefing

Karachi, November 12, 2015 (PPI-OT): Autos: October sales up 7% MoM; INDU outperforms

October 2015 auto sales witnessed a sharp uptick of 56% YoY, where Pak Suzuki Motor Company (PSMC) and Indus Motor (INDU) sales jumped by 92% YoY and 23% YoY respectively.

On a sequential basis, industry’s sales improved by 7% MoM where INDU outperformed (+10% MoM) on the back of 95% MoM higher Hilux sales.

In 4MFY16, auto sales clocked in 67% YoY higher at 74.5k units, where growth was led by (1) strong performance of eleventh generation Corolla and (2) the availability of concessionary cab scheme.

Trucks and buses sales volumes also continue to trend upwards, with Ghandhara Industries (GHNI) and Hinopak Motors (HINO) posting impressive growths of 102% YoY and 64% YoY respectively in Oct 2015.

The government continues to delay the announcement of the new auto policy. JS Securities Limited believes the policy should bode well for the sector, providing it a much-needed long-term (5-year) regulatory framework.

INDU leads October 2015 charts

October 2015 auto sales witnessed a sharp uptick of 56% YoY, where Pak Suzuki Motor Company (PSMC) and Indus Motor (INDU) sales jumped by 92% YoY and 23% YoY respectively. The increase in former’s sales is mainly owing to the concessionary cab scheme offered by the Punjab government, whereas latter’s uptick in volumes is on the back of strong performance of the eleventh generation Corolla (+20% YoY).

On a sequential basis, industry’s sales improved by 7% MoM where INDU outperformed (+10% MoM) on the back of 95% MoM higher Hilux sales. In 4MFY16, auto sales clocked in 67% YoY higher at 74.5k units. Trucks and buses sales volumes also continue to trend upwards, with Ghandhara Industries (GHNI) and Hinopak Motors (HINO) posting impressive growths of 102% YoY and 64% YoY respectively during Oct 2015.

Auto policy remains in limbo

The government continues to delay the announcement of the new auto policy. JS Securities Limited believes the policy should bode well for the sector, providing it a much-needed long-term (5-year) regulatory framework. JS Securities Limited expects lower duties across the board in the new policy, potentially resulting in higher vehicle demand with net duty protection for local assemblers remaining intact.

Pakistan’s trade deficit declines by 12% YoY in 4MFY16

In spite of 13.42% YoY contraction in exports to US$6.88bn during 4MFY16, Pakistan’s trade deficit narrowed by 12% YoY to US$7.70bn owing to 12.76% YoY fall in imports to US$14.58bn. Meanwhile trade deficit clocked in 25% MoM higher while 4% YoY lower at US$2.20bn.