AKD Securities Limited Equity Research – Daily Report (14-01-2020)

Karachi, January 14, 2020 (PPI-OT): Pakistan Autos: CY19 end couldn’t come sooner for OEMs

Dec’19 total industry sales of 12,415 vehicles (+21%MoM/-38%YoY), consisting of 9,987 passenger cars (+17%MoM/-38%YoY), 2,116 LCVs (+61%MoM/-36%YoY), and 251 trucks (-24%MoM/-17%YoY) wrapping up another year of drastic operational shifts and intermingled headwinds.

CY19 total industry sales of 191,085 units (-27.6%YoY) consist of 161,004 passenger vehicles (-25.6%YoY), 25,025 LCVs (-33.3%YoY), 4,294 trucks (-47.5%YoY) and 762 bus units (-22.2%YoY), marking the single largest decline since CY08, taking annual unit sales back five years to CY14-15 levels.

PC sales were increasingly reliant on modest slippages in low-mid segment vehicle market (800CC/1000CC segments moves -12.3/-24.9%YoY) as opposed to drastic declines in the premium 1300CC+ segment (-34.3%YoY) taking segment-wise sales composition to 42.6/24.7/32.8% for 1300CC+/1000CC/800CC segments vs. 5YR average of 49.3/17.7/32.9%.

Amongst major OEMs, PSMC/INDU/HCAR sold 109,858/46,943/28,102 vehicles during the period, receding -20.4/-28.4/-44.9%YoY, implying annual plant utilization (on stated double shift capacity) of 73/71/56% vs. 92/131/102% for CY18 as the industry dealt with a hampered demand outlook, specifically as consumers suffered from ‘sticker-shock’ over rabid price hikes.

Lessons for CY20 remain the persistence of the ‘new model effect’, witnessed in CY19 segment-wise sales, likely to play out in the case of the Vios/Yaris for INDU. Moreover, improvements in purchasing power, either from monetary loosening or relative PkR stability, accompanied by tax concessions for consumers (removal of FED) could catalyze demand in the coming year.

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