JS Securities Limited – JS Research (January 19, 2022)

Karachi, January 19, 2022 (PPI-OT): Auto Previews: HCAR to deliver highest YoY earnings growth in 2QFY22

We present our earnings estimates for the Dec 2021 quarter where driven by higher sales for the recently launched City, we anticipate HCAR to post highest earnings growth YoY, followed by INDU and PSMC.

Profitability in the sector is expected to remain under pressure despite price increase by all 3 listed companies in Nov 2021 due to further PKR devaluation.

Pak Suzuki Motor Company (PSMC)

With robust sales in Dec 2021, we expect the company to post an EPS of Rs 11.67 for 4QCY21, down by 32%/3% on a YoY/QoQ basis. This takes cumulative EPS for CY21 to Rs 38.29 as against an LPS of Rs 19.31 during SPLY. We expect a decline in net sales by 12% QoQ owing to lower sales volume while we expect a slight increase in gross margins owing to 10-15% price increase in Nov 2021 despite higher raw material costs amid PKR devaluation during the quarter.

Indus Motor Company (INDU)

INDU is expected to post an EPS of Rs 62.77 for 2QFY22, up by 67%/-9% on a YoY/QoQ basis, taking cumulative EPS for 1HFY22 to Rs 131.79 up by 116% YoY. We anticipate net sales to grow by 9% QoQ owing to higher sales volume however, gross margins are likely to decline as we expect impact of PKR devaluation and change in sales mix towards Corolla from Hilux to outweigh the impact of higher raw material costs amid PKR devaluation and price increase in Nov 2021.

Honda Atlas Cars (HCAR)

HCAR is expected to post an EPS of Rs 9.72 for 3QMY22, up by 85%/48% on a YoY/QoQ basis, taking cumulative EPS for 9MMY22 to Rs 22.8 up by 262% YoY. Earnings are to be driven by higher net sales by 19% QoQ owing to higher sales volume for the recently launched City coupled with an increase in gross margins due to launch of City at higher prices and price increase for Civic and BR-V in Nov 2021.

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