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Team AKD Research
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Pakistan Autos: Dampeners could moderate new model growth effect for PSMC

  • Pak Suzuki announced the release of the Alto's variants (2 manual, 1 auto) and price points (PkR1.0-1.3mn inclusive of FED), and final delivery dates yet to be confirmed, channel checks suggest commencement of deliveries from end June at the latest, allowing us to firm-up our fundamental expectations.
  • We expect Alto sales for CY19 to rest at ~22k vehicles, averaging monthly sales of ~3,650 vehicles, while for CY20/21, sales growth of 10/5% are expected (average of ~45k vehicles) while prices introduced are ~17% higher than the weighted average sale price of the Mehran, implying continuous contribution to margin stability
  • Considering that domestic buyers have largely been priced-out of the imported, secondary vehicle market we expect positive spillovers for the newly launched vehicle which offers base-line features comparable to eco segment import vehicles
  • That being said, apart from idiosyncratic positives inherent in a new model launch, we find the wider demand environment for vehicles sales to be tepid, where the unabated devaluation of the PkR is likely to diminish margins in the near term
  • PSMC is slated to record CY19/20 EPS of PkR4.3/21.1/sh, where this year's sales falter in the face of weak margins, financing cost from debt load, phasing out of the Mehran and declining LCV segment sales. At current price levels, our TP of PkR275.1/sh implies a Neutral stance.
Underlying
Pak Suzuki Motor Co. Ltd.

Pak Suzuki Motor is engaged in assembling, progressive manufacturing and marketing of Suzuki cars, pickups, vans, and 4X4 vehicles. Co.'s product models include Baleno, Margalla, Mehran, Kyber, Ravi Pickup, Bolan Van and Potohar Jeep.

Provider
AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

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Team AKD Research

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