omc: no mention; hence safe - BMA Capital Management

More documents

Recommendations

Info

AUTO MARKETWEIGHT Budget Impact Neutral Sana I. Bawani Auto Analyst 26 AUTO: GEARS UNCHANGED June 7, 2010 While no new policies were announced for the local auto assemblers, import rules for used cars also remain unchanged. This suggests that the government neither aims to encourage more imports of cars nor does it intend to let go of its revenue from the locally assemebled cars. We believe the government has taken a step in the right direction as automobile is characterized as a luxury product and relaxation in its imports would have further burdedened the country’s BoP while a reduction in duties on CKD kits would not necessarily have been passed on to the customers. Duties on CKD kits remain unchanged Contrary to industry expectations, Customs duty at 35% on CKD kits has been maintained for FY11. It is pertinent to note that CKD kits are imported by all the 4 listed auto assemblers for the manufacture of vehicles in the country. The imposition of this duty adds to their production costs however it is passed on to the customers in the shape of higher prices. Increase in demand during the year has resulted in production going up by 30% YoY to 110,612 units in 10MFY10 against 85,051 units produced in 10MFY09. Duties on CBUs also remain unchanged Age limit on import of old CBUs has also been kept unchanged at 3 years, contrary to importers’ expectations of an increase in the same. An increase in the age limit of imported used cars would have encouraged greater imports and burdened the BoP position. At the same time, continuation of this restriction signals to the continued strength of auto assemblers in the domestic market. Furthermore, duties on imported CBUs also remain unchanged: Import Tariffs on CBUs Company Import Tariff Upto 800cc 50% 800-1000cc 55% 1000-1500cc 60% 1500-1800cc 75% Source: Business Recorder, BMA Research Duty-free import of agricultural tractors Promotion of agriculture remains to be government’s key objective. For this reason, it has maintained duty exemption on import of agricultural tractors. During 10MFY10, tractor sales improved by 40% YoY to 57,749 units as various tractor schemes aided their offtakes. Increase in sales tax to increase car prices Increase in GST from 16% to 17% in the next fiscal year should lead to an increase in car prices from Jul 01, 10. Therefore, we expect May10 and Jun10 offtake numbers to be on the higher side; during 10MFY10 auto sales have increased by 37% YoY to 110,752 units with INDU leading the pack with 50% YoY growth in sales to 40,062 units.
27 Outlook FY11E June 7, 2010 Increased car prices, owing to higher GST, are expected to reduce the pace at which automobile sales have grown in the current year. We expect sales to clock in at 135,576 units in FY10E, up 38% from last year. However, sales growth is expected to be subdued in the following years to 8% and 9.5% in FY11E and FY12E. Additionally, the imposition of Value-Added Tax (VAT) from Oct 01, 10 in place of GST even at a reduced level (15%) is unlikely to bring about a downward revision in prices. We currently have an ADD stance on INDU with a DCFbased fair value of PKR288/share. Automobile Sales Expectations: FY10E-FY13E Company FY09A FY10E FY11E FY12E FY13E PSMC 50,584 71,000 77,728 86,014 96,202 INDU 34,146 50,000 54,000 58,860 58,860 HCAR 11,144 14,000 14,700 15,582 16,673 DFML 2,287 576 588 611 642 Total 98,161 135,576 147,016 161,068 172,377 Source: PAMA, BMA Research
Page 1 and 2: 65 Federal Budget 2010-11 Cautious
Page 3 and 4: 3 TABLE OF CONTENTS Budget FY11: No
Page 5 and 6: 5 June 7, 2010 package will have li
Page 7 and 8: 7 June 7, 2010 against an average o
Page 9 and 10: 9 Sector wise Budget Impact and BMA
Page 11 and 12: ECONOMY Budget Impact Positive Abdu
Page 13 and 14: 13 June 7, 2010 announced in the bu
Page 15 and 16: 15 KEY MEASURES Income tax June 7,
Page 17 and 18: E&P MARKETWEIGHT Budget Impact Neut
Page 19 and 20: OMC OVERWEIGHT Budget Impact Neutra
Page 21 and 22: 21 June 7, 2010 Moreover, seemingly
Page 23 and 24: CEMENTS OVERWEIGHT Budget Impact Ne
Page 25: CHEMICALS MARKETWEIGHT Budget Impac
Page 29 and 30: 29 Top Investment Ideas June 7, 201
Page 31 and 32: BUY Fair Value: PKR 282 Current Pri

omc: no mention; hence safe - BMA Capital Management

Create successful ePaper yourself

Delete template?

Save as template?