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AKD Quotidian about —: Auto Sector: Monthly Update

Karachi: As the post budget rally continues (incentives announced in the FY12 budget- removal of SED and reduction of GST), auto sales (both Cars and LCVs) posted a growth of 24%YoY in 4MFY12.

According to AKD Securities, in this regard, latest statistics reveal a growth of 23%YoY in cars sales (to 51,755 units), while LCVs sales grew by 29%YoY to stand at 7,046 units in the review period. Additional support came from the delivery of 2k (per month beginning Sep’11) extra cars by PSMC for the Government of Punjab’s taxi scheme. On the tractors front, however, sales declined by 59%YoY to stand at 8,269 units in 4MFY12 (no action as yet from the GoP on the GST issue). Going forward, while the overall domestic auto sector continues to remain exposed to the risk of lower-cost imports, PSMC should benefit from the sale of 20k cars (Sep’11-Jun’12) for the Government of Punjab’s taxi scheme. On the tractors front, while AKD is in the process of updating AKD’s financial models, they advise investors to remain sidelined from tractor scrip, till clarity emerges on the GST issue.

 

Auto Numbers – 4MFY12
4MFY11 4MFY12 YoY Sep’11 Oct’11 MoM
Total Cars 41,941  51,755 23.4% 12,512 13,690 9.4%
Total LCVs 5,450 7,046 29.3% 1,502 1,417 -5.7%
Tractors 47,391  58,801 24.1% 14,014 15,107 7.8%
MTL 12,964 6,070 -53.2% 1,887 2,805 48.6%
AGTL 7,005 2,199 -68.6% 335 1,249 272.8%
Total 19,969 8,269 -58.6% 2,222 4,054 82.4%
Source: PAMA

 

Cars and LCVs: In 4MFY12, total Cars and LCVs posted a sales growth of 24%YoY (to 58,801 units). In this regard, cars sales grew by 23%YoY to stand at 51,755 units, while LCVs sales grew by 29%YoY to stand at 7,046 units. PSMC (with its smaller, lower priced vehicles) continued to outperform the industry sales growth, reporting a total sales growth of 38%YoY. The company sold 29,155 cars (up 41%YoY) in the review period, with all its variants reporting double digit growth. Recent agreement with the Government of Punjab added impetus to PSMC’s sales. HCAR and INDU reported respective sales growth of 14%YoY (to 5,893 units) and 7%YoY (to 17,806 units). Sequentially, while total cars sales grew by 9.4%MoM, LCVs sales declined by 5.7%MoM.

Tractors: Absence of subsidy schemes and the imposition of GST in the current fiscal year, led to decline of 59%YoY (to 8,269 units) in tractor sales. In this regard, MTL sold 6,070 units (down 53%YoY), while AGIL sold 2,199 units, reporting a decline of 69%YoY. Sequentially however, marking the harvest season, tractor sales grew by 82%MoM to stand at 4,054 units in Oct’11. However, while AKD’s investment case for tractors remains under review, AKD advises investors to remain sidelined from tractor scrips till clarity emerges on the GST issue.

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