Update Pulse

July 13, 2011

Automotive Sector: June11 - Car sales fall for a good reason

June11 while its share in total FY11 car sales improved slightly to 11% from 10% in FY10, however, HCAR market share remained extremely lower than others:
FY10
PSMC 10% 36%

BUY
Market Snapshot Index KSE 30 11660.71 KSE 100 12191.78 KSE ALL 8465.33 Chg -71.25 -100.12 -66.30 % -0.61 -0.81 -0.78

Pakistan Research

Synopsis
The Pakistan Automotive Manufacturers Association (PAMA) has released production and sales data for the month of Jun11. As per the data, MoM sales volume witnessed a decline of 43% 7,419 units as against sales volumes of 13,126 units in previous month. The MoM basis substantial drop in is sales was mainly because expected decline in car prices. The GoP has revised GST downward as well as removed SED on car sales in federal budget FY12 which provoked consumer to deferred buying until impact is reflected in prices. As far as the cumulative FY11 performance is concerned, the car industry showed a reasonably modest , during the FY11, auto sale volumes rose by 4% units to 145,645 as against 140,307 units recorded in the same period of last year.
Company wise sales
S crips P SMC INDU HCA R DFML Total May-11 7,977 4,205 944 13,126 Jun-11 2,761 3,870 788 7,419 %Chg -65% -8% -17% NA -43% FY10 73,993 50,823 14,120 1,371 140,307 FY11 79,941 50,015 15,486 203 145,645 %Chg 8% -2% 10% -85% 4%

Market Share
PSMC 11% 34%

FY11
INDU 0% HCAR DFML 55%

IN DU HCAR 53% DFML 1%

Source: PAMA & Summit Capital Research

Segment wise performance Hilux everywhere PSMC : On MoM basis, Bolan and Mehran recorded biggest
decline of 66% and 65% respectively. On YoY basis Swift (7months sales) and Bolan registered a growth of 19% and 16% respectively. Liana seems to be ignored by the consumers as its MoM and YoY sales declined by 62% and 54% respectively. INDU : On M-o-M basis, Cuore experienced a declined of 19% followed by Corolla whose sales dropped by 15%. However, on YoY basis total sales of the Cuore posted a rise of 13% whereas Cororla sales remained lower by 6%. On the other hand, in Pickup segment, Hiluxe showed an exceptional upsurge of 87% MoM and also witnessed a 44% YoY rise in FY11. HCAR : On M-o-M basis, both segments (Civic and City) of the company showed a lackluster performance as sales of the Civic and City declined by 34% and 6% respectively. However, on YoY basis, both segments, Civic and City showed an improved performance by 8% and 10% respectively.
Monthly auto sales trend
17,500 14,000 10,500 7,000 3,500 Aug May
Jun-11

FY10

FY11

Nov

Dec

Mar

Source: PAMA, Summit Research

12M relative performance vs KSE

137%

KSE-100 INDU

PSMC HCAR

Sales performance PSMC witnessed a biggest decline

On MoM basis during the month of Jun11 sales of HCAR declined substantially by 17% to 788 units against sales of 944 units in the previous month. Similarly, INDU sales went down by 8% MoM to 3,870 units against 4,205. PSMC sales witnessed biggest hit among others as its sale went down by 65% MoM to 2,761 units as against sales of 7,977 units in the last month. PSMC continued ruling the market in terms of market share as during the June11 its share in cars segment stood 61% and also cumulative FY11 market share remained substantially 53% which is far higher than others as next close player is INDU whose market share in June11 remained 32% whereas its cumulative FY11 market share was 34%. HCAR had the lowest market share of 7% in

119%

101%

83%

Recommendation
We expect an improvement in auto sales during FY12 and our expectation for slow pace recovery is based on 1) impact of 1% lower GST removal of 2.5% SED 2) impact of GoP taxi scheme 3) restoration normal parts supply from Japan 4) improved economy. Thus, we believe improvement in the basic growth drivers will have a positive impact on the industry. Our target price for INDU and PSMC is PKR247 and PKR73 respectively. We suggest a BUY stance.

65% Aug-10 Sep-10 Oct-10 Dec-10 Feb-11 Jan-11 Apr-11 May-11 Nov-10 Mar-11 Jul-10 Jul-11

Analyst: Muhammad Sarfraz Abbasi Sarfraz.abbasi@summitcapital.com.pk Phone: 021-35376125 B-209, Park Towers, Clifton, Karachi

Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Summit Capital (Pvt.) Limited accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty and Summit Capital (Pvt.) Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.

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