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December 13, 2010

Pakistan Market JS Research

KSE100 Index: Closing 11,620.16 (+51.07)
Auto sales for 5MFY11 Units Indus Motor Pak Suzuki Dewan Motor Honda Car Industry LCV/car Industry cars Source: PAMA 5MFY11 20,375 32,092 70 6,247 59,156 46,822 5MFY10 18,478 28,339 689 5,104 53,038 42,166 YoY % 10% 13% -90% 22% 12% 11%

Auto sales up 18%YoY in Nov

Auto sales witnessed an increase of 18%YoY in Nov; though were down 14%MoM. We believe higher cotton prices have led to an improved demand for vehicles this year with Pak Suzuki (PSMC) and Honda Car (HCAR) being the leading beneficiaries. However, the consumers tradition of delaying their purchases to the New Year caused the MoM decline. We maintain our Market Weight stance on the sector, and believe PKR depreciation against JPY and rising other input costs remain foremost concerns. Hence, we see the current price level of INDU as an ideal opportunity to exit whereas we remain Neutral on PSMC.

Although the authorities have raised the age limit for import of cars to 5 years from 3 years, we primarily remain concerned about the rising cost pressures for the local auto manufacturers. With a Market-Weight stance on the sector, we advise investors to exit INDU at current levels, and remain Neutral on PSMC. 92 (21) 111-574-111 (ext: 3118)

Market share in 5MFY11

Auto sales up 18%YoY; down 14%MoM

Auto sales numbers for Nov remain on the higher side of expectations, rising by 18%YoY. Though floods were largely expected to dampen vehicles demand, we chose to remain optimistic, eyeing improved farmer income on the back of higher cotton and other commodities prices as key catalysts for growth. On a MoM basis, decline in sales of 14% was largely anticipated (10-yr avg. decline of 12%) as consumers begin to delay their purchases from Nov, to take advantage of next years registration.
Auto sales for the month of November 2010 Units Indus Motor Pak Suzuki Dewan Motor Honda Car Industry LCV/car Industry cars Source: PAMA Nov-10 Nov-09 3,753 6,813 1,075 11,765 9,057 3,568 5,410 135 754 9,964 7,613 YoY Nov-10 Oct-10 % 5% 3,753 26% 6,813 NM 43% 1,075 18% 11,765 19% 9,057 4,830 7,459 18 1,340 13,704 10,645 MoM % -22% -9% NM -20% -14% -15%

Also in focus

Remittances for Nov up 8.4%MoM at US$926.9mn

According to the latest data released by the SBP, home remittances for the month of November reached US$926.9mn, rising by an impressive 24.8%YoY and 8.4%MoM on account of the Eid season. The cumulative figure for 5MFY11 rose to US$4.4bn, up 15.5%YoY.

11% 1% Indus Motor Source: PAMA Pak Suzuki Others 54% Honda Car

Where is the growth coming from?

Growth has largely been broad based, with 1300CC and above cars witnessing the highest increase of 15%YoY (vs. overall 12%) however, one needs to also factor in the launch of Suzuki Swift this year. Excluding the said would lower growth in the category to 9%YoY. Smaller cars (800CC to below 1000CC) and LCVs witnessed somewhat similar growths of 11% and 13%, respectively. The 1000CC category registered the lowest growth of 3%YoY.
Break up of auto sales Units 1300CC and above cars 1000CC cars 800CC - below 1000CC cars LCVs Source: PAMA 5MFY11 24,828 9,750 12,244 12,334 5MFY10 21,680 9,435 11,051 10,872 % 15% 3% 11% 13%

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5MFY11 growth at 12%YoY

YTD sales growth has risen to 12%YoY with a double digit rise witnessed by all 3 major manufacturers. PSMC maintained its lion share of the market at 54%, followed by INDU (34%) and HCAR (11%).


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