Morning Call June 13, 2012 Auto Data Automobile & Parts 11MFY12 auto sales register 15% YoY growth As per the latest available data, recently released by the Pakistan Automotive Manufacturers Association (PAMA), car and LCV sales witnessed a 15.1% YoY Market Share: YoY Comparison growth in 11MFY12. Segment-wise break-up reveals that the economy segment 6% (less than 1,000cc) led the growth with sales increasing by 24.9% YoY during the FY12 period under review. This was followed by the 1,000-1,300cc segment, which 11% witnessed sales growth of 19.2% YoY to 26,734 units. The high-end segment (1300cc+) meanwhile remained the sector’s laggard and sales grew by a meager 31% 56% 33% 2.1% YoY to 58,458 units. This lackluster performance can mainly be attributed to FY11 63% the suspension of production at Honda Atlas Car’s (HCAR) plant from Dec-11 to Mar-12, and single-digit sales growth of Corolla. Sales of LCV’s and 4x4’s registered a healthy 27.4% YoY growth in 11MFY12, mainly due to a jump in Bolan (PSMC), Ravi (PSMC) and Hilux (INDU) sales. PSMC INDU HCAR Auto data May-12 Apr-12 MoM May-11 YoY 11MFY12 11MFY11 YoY Source: PAMA 1300cc & above 6,151 5,919 3.9% 4,888 25.8% 58,458 57,251 2.1% PKR JPY Parity 1000cc 2,592 1,726 50.2% 2,320 11.7% 26,734 22,434 19.2% 1.19 <1000cc 6,191 5,715 8.3% 2,914 112.5% 36,036 28,846 24.9% 1.15 Total cars 12,431 11,224 10.8% 10,120 22.8% 121,228 108,531 11.7% LCV's + 4x4 4,179 3,574 16.9% 3,034 37.7% 38,717 30,391 27.4% 1.11 Total 16,610 14,798 12.2% 13,154 26.3% 159,945 138,922 15.1% 1.07 Company wise May-12 Apr-12 MoM May-11 YoY 11MFY12 11MFY11 YoY 1.03 PSMC 10,608 8,837 20% 7,920 34% 100,805 77,123 31% … - 11 11 11 11 11 11 12 12 12 11 12 - - - - - - - - - - - INDU 4,846 5,203 -7% 4,205 15% 48,907 46,145 6% May Jul Apr Oct Jun Jan Aug Sep Feb Mar Nov Dec HCAR 1,150 752 53% 944 22% 9,901 14,698 -33% Source: Bloomberg Source: PAMA PSMC: Demand on song Car and LCV Sales ('000 units) Pakistan Suzuki Motor Company Limited (PSMC) witnessed a 31% YoY 18 improvement in sales in 11MFY12 to 100,805 units. PSMC has benefitted from the Punjab Government’s Yellow Cab Scheme, which has resulted in sales of Mehran 16 and Bolan to increase by 39% YoY and 54% YoY respectively. Sales of Swift, 14 Cultus and Alto meanwhile, increased by 67% YoY, 23% YoY and 15% YoY 12 respectively in 11MFY12. Total units sold by the company in May-12, increased by 10 20% MoM to 10,608 units. On a YoY basis, this figure is 34% higher than May-11’s 8 sales of 7,920 units. 6 INDU: Company witnesses negative sales growth in May-12 11 11 11 11 12 11 11 12 12 12 11 11 12 - - - - - - - - - - - - - Sales of Indus Motor Company Limited (INDU) decreased by 7% MoM in May-12 to Jul Oct Apr Jun Jan Feb Mar Aug Sep Nov Dec 4,846 units. The primary reason behind this decline is the discontinuation of Coure, May May Source: PAMA with only 63 units being sold during the month. During 11MFY12, the company sold a total of 48,907 units, which is 6% higher on a YoY basis. Hilux has remained at Analyst the forefront (with respect to sales growth), and its sales are higher by 56% YoY to Umar Hafiz 3,625 units in 11MFY12. Sales of Corolla during 11MFY12 increased by 9% YoY to [email protected] 41,720 units. 021-32462589 HCAR: Resumption of operations lead to impressive growth Honda Atlas Cars Pakistan Limited (HCAR) reported a 53% MoM increase in total www.arifhabibltd.com units sold to 1,150 units. The company’s endeavors to clear the backlog of orders of its City model resulted in sales of the model to jump by 533% MoM to 1,050 units. In Disclaimer: The information contained herein is compiled from sources AHL believes to be reliable, but we do not accept responsibility for its accuracy or completeness. It is not intended to be an offer or a solicitation to buy or sell any securities. AHL and its officers or employees may or may not have a position in or with respect to the securities mentioned herein and they do not accept 1 any liability whatsoever for any direct or consequential loss arising from the use of this publication and its contents. AHL may, from time to time, have a consulting relationship with a company being reported upon. All opinions and estimates contained herein constitute our judgment as of the date mentioned in the report and are subject to change without notice. Morning Call June 13, 2012 11MFY12 however, the company was only able to sell 9,901 units (33% lower YoY) owing suspension of production due to floods affecting its primary parts supplier in Thailand last year. Tractors: Al-Ghazi Tractors lead sector’s sales growth Al-Ghazi Tractors Limited (AGTL) registered a healthy 20% MoM sales growth to 2,743 units in May-12, helping the segment attain an overall performance improvement of 10% MoM to 6,913 units. On a YoY basis however, the sector recorded 33% lower sales owing to the imposition of GST last year, which resulted in demand for the product drying and production being suspended as a consequence. Millat Tractors Limited meanwhile, reported a 4% MoM improvement in sales to 4,170 units. On a YoY basis, sales of AGTL and MTL declined by 42% and 28% respectively during 11MFY12. This was mainly on account of the suspension of production mentioned above. Budget FY13 provides some insight into possible regulatory changes The government is considering abolishing regulatory duty and scaling down Customs duty to 25% on various luxury goods, which include new and used cars and their components. While Depreciation allowance of 1% per month on import of CBUs is expected to remain unchanged, despite a proposal of 2% per month by the car importers. Although the final word in this regard is going to be contained in the upcoming Auto Industry Development Plan (AIDP-II), we believe that those guidelines are going to be more or less in line with the announcements in Budget FY13. PSMC is our top pick Trading at a discount of 24%to our Dec-12 target Price of PKR 110.0/share, our top pick in the sector is PSMC. 2 .