Pakistan Automobile Assemblers


Dear Clients,

KASB Automobile Assembler Universe earnings season kicks off with HCAR’s 1QMY22 earnings. We expect Pakistan Auto OEMs 2QCY21 EBITDA margins to improve ~165bps QoQ. We see Q2 results may act as a catalyst for upward revision of FY22/FY23 consensus estimates. The key focus into this earnings season will likely be volumes/market guidance and any changes to model lineup, especially in light of the upcoming Auto Policy. That said, the three listed OEMs cumulatively sold 44,178 units as a strong demand surge drove volumes up by 3.4x YoY. On a sequential basis, the sector saw a 16% QoQ drop in demand amid extended holidays. Consequently, we note sector profitability to grow by 1% on QoQ basis. Last year, the sector remained in losses.

Indus Motor Company (INDU): In the upcoming quarter results, INDU is likely to deliver a solid revenue jump for the quarter to clock in at PKR 46.4bn on the back of Toyota Yaris success with 14,566 units sold as well as improving revenue mix towards high-end variants. We anticipate the company to post gross margins at 9.8% for the quarter stemming from PKR appreciation and JPY depreciation against the USD while car prices remained firm. Order book continues to improve and is expected to elevate cash balances further for the company with an expected income contribution of PKR 1.6bn. Overall profitability is expected to reside at PKR 3.5bn (up by 35x YoY and down by 4% QoQ) translating to an EPS of PKR 44.05/sh with an expected dividend announcement of PKR 29/sh. This takes earnings for FY21 to PKR 151/sh, up by 2.3x YoY.

Honda Atlas Cars Pakistan (HCAR): We expect HCAR to post profitability of PKR 826mn for 1QMY22, down by 8% QoQ. Revenues for the quarter are expected to stand at PKR 21.4bn, down by 6% Q/Q as a result of 5% lower volumes having sold 7,593 units only. As the bulk of order flow concentrated towards Civic followed by City, we expect the company to sustain margins at 6.0% for the period up by ~79/515bps compared to Mar-21/Jun-20. BRV remained a laggard with just 1,133 units sold. A notable improvement in other income to PKR 385mn for the quarter as compared to PKR 91mn last year is likely to help the company post profits of PKR 826mn (EPS of PKR 5.8/sh) for the quarter.

Pak Suzuki Motor Company (PSMC): The company is poised to post a profit of PKR 1,058mn for the quarter translating to EPS of PKR 12.9/sh. The company saw a 2.9x Y/Y rise in vehicle sales to 22,019 units for the quarter leading to revenues of PKR 28.7bn.  We anticipate the company to record gross margins at 7.0% owing to a mix of better utilization levels, improved pricing, and PKR appreciation. We further note a decrease in finance cost (expected retirement of loan from parent) and curtailed expenses to drive the company bottom-line. Resultantly, we anticipate sturdy profitability of PKR 12.9/sh taking 1HCY21 EPS to PKR 22.3/sh.

KASB Research

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