AKD Quotidian about — Autos: Flattish sales in Feb14

Karachi, March 11, 2014 (PPI-OT): Total auto sales (cars + LCVs) in Feb14 have registered at 12,789 units (+1%YoY/-8%MoM) with car sales clocking in at 11,238 units (-1%YoY/- 6%MoM).

According to AKD Securities, as a result, 8MFY14 car sales are up by 3.5%YoY to 76,072 units. HCAR has been the main outperformer, post launch of the Civic model and on continued strong City performance, with 8MFY14 sales of 14,821 units (+18%YoY). On the tractors front, despite semblance of a sequential rebound in Feb14, sales remain subdued from a historical basis with 8MFY14 sales of 20,485 units lower by 35%YoY (post increase in GST). The listed auto space has gained 10.2%CYTD vs. the KSE-100 Indexs returns of 7.6% over the same period. Going forward, further price performance is dependent on the provisions of the upcoming auto policy particularly from the vantage of the age limit of imported used cars. AKD Securities maintains a preference for INDU over PSMC where the PKRs renewed appreciation vs. the JPY (over the last month) may cause near-term excitement particularly if it morphs into a trend.

Feb14 sales review: Total auto sales (cars + LCVs) in Feb14 have registered at 12,789 units (+1%YoY/-8%MoM) with car sales clocking in at 11,238 units (-1%YoY/-6%MoM). As a result, 8MFY14 car sales are up by 3.5%YoY to 76,072 units, led by HCAR. At the same time, LCV/Pickup sales in Feb14 have risen by an impressive 25%YoY in 8MFY14 to 11,879 units on higher Suzuki Ravi sales and resumption of Hyundai Shehzore sales. On the tractors front, Feb14 sales have registered at 1,605 units (- 32%YoY/+218%MoM) bringing 8MFY14 sales to 20,485 units, down by 35%YoY.

Feb14 Auto Sales

(Units)              Feb-14   Jan-14       MoM      YoY    7MFY14    7MFY13     YoY

Ind. Perform.

Industry Sales       12,789   13,910     -8.1%     1.3%    87,951    82,980    6.0%

Cars                 11,238   11,955     -6.0%    -0.9%    76,072    73,502    3.5%

LCVs and Pickups        1,551    1,955    -20.7%    20.5%    11,879     9,478   25.3%

Tractors              1,605      504    218.5%   -32.1%    20,485    31,398  -34.8%

Company Wise

PSMC                  6,941    7,089     -2.1%    -0.8%    49,522    48,328    2.5%

INDU                  3,505    3,992    -12.2%    -2.4%    22,676    21,850    3.8%

HCAR                  2,232    2,600    -14.2%    10.8%    14,821    12,528   18.3%

MTL                   1,060      189    460.8%   -47.1%    12,722    19,068  -33.3%

AGTL                    545      315     73.0%    51.8%     7,763    12,330  -37.0%

PSMC: Has sold 6,941 units in Feb14 (-1%YoY/-2%MoM) to bring 8MFY14 sales to 49,522 units (+2.5%YoY). Strong performing variants for the month under review include Cultus (+15%YoY to 1,346 units) and the Ravi (+11%YoY to 1,122 units). Coming from a high base however, Bolan sales have come off by 23%YoY to 1,156 units. At current levels, AKD Securities has a Neutral stance on PSMC based on AKD Securities’ target price of PkR173.5/share.

INDU: Feb14 sales of 3,505 units are lower by 2%YoY/12%MoM with sales of the bellwether Corolla variant lower by 6%YoY to 3,141 units. In 8MFY14, sales are higher by 4%YoY to 22,676 units (+2.4%YoY ex-Fortuner which was launched in early CY13). At current levels, AKD Securities’ target price of PkR384/share implies a Neutral stance.

HCAR: Has sold 2,232 units in Feb14, higher by 11%YoY but lower by 14%MoM post New Year registrations. Consequently, HCARs 8MFY14 sales have registered at 14,821 units (+18%YoY). The key reason behind robust performance is the launch of the new Civic model with 8MFY14 sales of 6,466 units higher by 15%YoY. At the same time, the City variant has continued its impressive performance with Feb14 sales higher by 18%YoY and 8MFY14 sales up by 21%YoY.

Tractor: Feb14 sales have registered at 1,605 units (-32%YoY/+218%MoM) bringing 8MFY14 sales to 20,485 units, lower by 35%YoY (post increase in GST). In this regard, MTL has posted sales of 1,060 units in Feb14, higher by 5.6x MoM while AGTLs Feb14 sales of 545 units are up by 73%MoM. While the sequential increase in tractor sales is encouraging, sales remain way off the pace from a historical basis.

Investment perspective: The listed auto space has gained 10.2%CYTD vs. the KSE-100 Indexs returns of 7.6% over the same period. Going forward, further price performance is dependent on the provisions of the upcoming auto policy particularly from the vantage of the age limit of imported used cars. AKD Securities maintains a preference for INDU over PSMC where the PKRs renewed appreciation vs. the JPY (over the last month) may cause near-term excitement particularly if it morphs into a trend.