Morning Call about – Auto sales down 24% in FY13, earnings to follow the same pattern – Arif Habib Limited

Karachi, July 11, 2013 (PPI-OT): Pakistan Automotive Manufacturers Association (PAMA) released the latest auto sales and production figures for Jun’13.

According to Arif Habib Limited volumes showed car and LCV sales as marginally up 3% MoM in Jun’13. With this, cumulative auto sales for entire year FY13 (Jul-Jun’13) plunged by a hefty 24% YoY. Segment-wise break-up showed 1000-1300cc segment dropped 28% MoM and a massive 56% YoY in FY13.

Following this, the economy segment of the industry (below 1000cc) witnessed a decline of 10% MoM, and 17% YoY in FY13. The high-end segment (+1300cc) showed some improvement with 3% MoM in Jun`13 while, on FY13 basis, the sales were still down 9% YoY.

The situation as a whole has been unfortunate for the industry during FY13 amid high base-effect of last year (govt scheme) and piled-up inventory of imported cars alongside govt amnesty scheme on illegally imported automobiles.

Auto data           Jun-13   May-13   MoM  Jun-12    YoY   FY13    FY12     YoY
1300cc and above     6,406   6,235     3%   7,358   -13%  60,103  66,299   -9%
1000cc               1,002   1,394   -28%   3,247   -69%  13,308  29,981  -56%
<1000cc              2,759   3,070   -10%   2,952    -7%  32,478  38,988  -17%
Total cars          10,167  10,699    -5%  13,557   -25% 105,889 134,785  -21%
LCV's+ 4x4           3,693   2,758    34%   5,599   -34%  29,421  44,316  -34%
Total               13,860  13,457     3%  19,156   -28% 135,310 179,101  -24%

Company wise       Jun-13  May-13    MoM  Jun-12    YoY   FY13     FY12    YoY
PSMC                12,037  12,290    -2%  11,352    6%   75,650  112,157  -33%
INDU                 4,243   3,768    13%   5,570  -24%   37,773   54,477  -31%
HCAR                 2,307   2,392    -4%   2,218    4%   21,235   12,119   75%
Source: PAMA

PSMC: market share shrank to 56% in FY13
In FY13, the market share of Pakistan Suzuki Motor Company Limited’s (PSMC) dropped to 56% as compared to 63% in the previous year. This was due to a 33% plunge in sale units to 75,650 during FY13. In Jun’13 too, the company’s sales remained dull and declined 2% MoM to 12,037 units.

INDU: sales plunged 31% YoY in FY13
Indus Motor Company Limited’s (INDU)’s sales growth, though slow, is now in its second consecutive month of growth, with 13% MoM jump in Jun’13 to 4,243 units. However, company’s FY13 sales were massively down by 31% YoY to 37,773 units.

HCAR: a better-off FY13, 75% YoY jump in FY13
Honda Atlas Cars Pakistan Limited (HCAR)’s sales showed decline of 4% MoM in Jun’13 to 2,307 units, however, FY13 depicted an improved position for HCAR, where the sales during the period surged by 75% YoY.

This can mainly be attributed to the new model launch of ‘Civic’ and new edition of ‘City’ variant, coupled with the low base-effect (Thailand floods), leading to a massive growth number for HCAR.

Tractor sales up 42% MoM
Tractor industry sales leapt 42% MoM to 6,237 units in Jun’13. Company-wise analysis reveals Millat Tractor’s sales recorded a huge 42% MoM jump in Jun’13 to 4,734 units while Al-Ghazi Tractors’ sales remained stagnant during the month.

As far as full-year FY13 tractor volume growth is concerned, total tractor sales recorded a meagre 2% YoY increase with total units sold at 50,593 during FY13.

Earnings outlook and Recommendation
With Apr-Jun’13 quarter volume figures; Arif Habib Limited estimates INDU’s EPS in the range of PKR 11.5-12.0, and FY13 at PKR 33.51-34.01, down 38% YoY. As far as PSMC is concerned, Arif Habib Limited expects 2Q EPS to clock in at PKR 6.7-7.0 and 1HCY13 at PKR 11.10-11.40, down 31% YoY.

From a stock valuation perspective, INDU is trading at a FY13E PE of 9.0x while offering DY of 7%. On the other hand, PSMC is trading at a CY13F PE of 8.7x with a DY of 4%. Arif Habib Limited thus maintain a ‘Hold’ recommendation on both of the Auto Assemblers.

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