-Auto sales preserved their YoY winning streak in FY14, with 5% YoY growth in Dec 2013. That said as expected sales fell by 8% MoM on the back of year-end seasonal decline.
–Overall auto sales clocked in at 61.3k units for 1HFY14, 6% YoY higher vis-à-vis 1HFY13. YTD growth trend is running in line with our FY14E sales target of 145k units (+7% YoY).
-While encouragingly Indus Motors’ (INDU) sales jumped by 26% YoY in Dec 2013, we flag low base of last year (-26%MoM in Dec 2012) largely contributed to these gains as sales are down 9% MoM.
-The PKR/JPY exchange rate remains in favor of local auto assemblers where the PKR has gained 9% vs. the Yen over Oct 2013 – Jan 2014. We believe this points towards potential margin expansion for domestic auto assemblers from 3QFY14.
-With the AIDP-2 pending and an increase in allowable age limit on imported cars still a possibility, we await clarity on the same before turning more bullish on the sector.
-We maintain our ‘Hold’ recommendations on both Indus Motors (INDU: Target Price Rs341) and Pak Suzuki (PSMC: Target Price Rs159).
Autos sales preserve YoY winning streak in FY14
Auto sales preserved their FY14 YoY winning streak (YoY higher sales every month so far) with 5% YoY higher sales in Dec 2013 vs. Dec 2012, owing to 26% YoY higher sales by Indus Motors (INDU). While the uptick in sales for INDU is encouraging (particularly sales of the high-margin Fortuner,+138% MoM), we flag that low base of last year (26%MoM sales decline Dec 2012 vs. industry’s decline of 8%MoM) largely contributed to these gains. This is also vetted by the fact that INDU sales are down 9% MoM in Dec 2013, while overall industry volumes declined by 8% MoM on the back of year-end seasonal decline as customers delay their purchases until the New Year. Overall auto sales clocked in at 61.3k units for 1HFY14, 6% YoY higher vis-à-vis 1HFY13 with YTD growth trending in line with our FY14E sales target of 145k units (+7% YoY). In 1HFY14, both INDU and PSMC sales increased by 3% YoY while Honda Car (HCAR) jumped by 20% YoY.
Tide slowly turning in autos favor
We flag PKR/JPY exchange rate remains in favor of local auto assemblers where the PKR has gained 9% vs. the Yen over Oct 2013 – Jan 2014. We believe this points towards potential margin expansion for domestic auto assemblers from 3QFY14 as auto assemblers continue to pass on other inflationary shocks. However we await further clarity on AIDP-2 before turning more bullish on the sector where an increase in allowable age limit on imported still remains a possibility. We maintain our ‘Hold’ recommendations on both INDU (Target Price Rs341) and PSMC (Target Price Rs159).
