We use the quarterly capex for the main three OEMs as a proxy to show the car industry’s impending advancements in Pakistan. PSMC spent PkR4.5 billion in 9MCY21 (5.7xYoY), indicating that the new Swift is in the works and will be introduced in 2HCY22.
INDU’s investment in 1QFY22 fell marginally to PkR437 million, compared to an average quarterly capex of PkR614 million in FY21, indicating that the additional capacity will be operational shortly. In the most recent quarter, HCAR’s capex climbed from PkR234mn in 1QMY22 to PkR523mn in 2QMY22, indicating the start of development of the new Civic; however, we have yet to receive confirmation from management.
We expect the 4th generation of Swift to be launched locally in 2HCY22 which is expected to be a handsome upgrade for the Pakistani market as the company had been selling the 2nd generation of swift for over a decade. The car is expected to be propelled in 1.2L engine and expected to be priced in the range of PkR2.6-2.8mn.
In the latest development, the govt. has increased the RD on imported CBUs from 15% to 50% in order to contain the massive increase in import bill. This bodes well for the local OEMs, enabling them to capture the lost market share.
Our preferred play is INDU (TP: PkR1,750/sh) owing to first mover advantage in hybrid segment and cushion of ~PkR100/sh in form of other income. At the same time, we like PSMC (TP: PkR280/sh) owing to the new Swift in pipeline and fading completion from imported CBUs.