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MORNING BRIEFING
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 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.
Outlook
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. atif.zafar@js.com 92 (21) 111-574-111 (ext: 3118)
Also in focus
34%
11% 1% Indus Motor Source: PAMA Pak Suzuki Others 54% Honda Car
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