AUTO INDUSTRY'S PERFORMANCE ON STOCK EXCHANGE

A SIZEABLE INCREASE IN MARKET CAPITALIZATION

SHAMSUL GHANI
shams_ghani@hotmail.com
Jan 14 - 20, 2008

The incident of 9/11 brought in its lap bitter fruits of destruction and human degradation. However, for Pakistan's auto industry, it proved to be the harbinger of good tidings. With a marked decline in the value of dollar resulting in reduced import costs, the industry flourished and emerged on the stock exchange as one of the most vibrant and growth oriented sectors.

Tables 1 & 2 below narrate the story of success in most lucid terms. With the stock exchange's enviable performance since 2002, the sector never looked back and the share prices of companies listed under this sector soared high in unison with the KSE indices.

TABLE - 1

 

POSITION AS OF 07-07-2005

POSITION AS OF 14-12-2007

COMPANY

PAID UP CAPITAL

RATE (RS.)

MARKET CAPITALIZATION

PAID UP CAPITAL

RATE (RS.)

MARKET CAPITALIZATION

AUTOMOBILE ASSEMBLERS

 

MILLION RS.

 

MILLION RS.

MILLION RS.

 

MILLION RS.

Al-Ghazi Tractors

214.682

145

6,225.778

214.682

292

12,537429

Atlas Honda

255.460

295

7,536.070

472.984

204

9,648.874

Dewan Farooque Motors

770.733

19

1,464.393

770.733

13

1,001.953

Ghandhara Industries

65.553

25

163.883

213.044

42

894.785

Ghandhara Nissan

450.025

16

720.040

450.025

49

2,205.123

Ghani Auto Industries

100.000

15

150.000

200.000

11

220.000

Hinopak Motors

124.006

105

1,302.063

124.060

599

7,431.194

Honda Atlas Cars

420.000

59

2,478.000

1,428.000

58

8,282.400

Indus Motor

786.000

93

7,309.800

786.000

344

27,038.400

Millat Tractors

120.141

205

2,462.891

187.420

287

5,378.954

Pak Suzuki Motor Co

540.443

105

5,674.652

822.999

354

29,134.165

Saif Nadeem Kawasaki

25.830

1

2.583

25.830

3

7.749


AUTOMOBILE PARTS & ACCESSORIES

Agriauto Industries

120.000

48

1,152.000

120.000

117

2,808.000

Allwin Engineering

123.367

33

407.111

123.367

31

382.438

Atlas Battery

45.979

77

354.038

69.925

155

1,083.838

Baluchistan Wheels

115.950

36

417.420

133.443

92

1,227.676

Exide Pakistan

54.057

65

351.371

54.057

207

1,118.980

General Tyre & Rubber

597.713

33

1,972.453

597.713

28

1,673.596

Transmission Engineering

-

-

-

45.000

10

45.000

Automotive Battery

52.648

14

73.707

52.648

32

168.474

Bela Automotive

58.000

6

34.800

58.000

5

29.000

Dewan Automotive Engg.

90.000

10

90.000

214.000

6

128.400

Total

5,130.587

 

40,343.051

7,163.930

 

112,446.425

During the study period of nearly two and a half years, the sector recorded a hefty increase of Rs.72 billion (179%) in market capitalization. Al-Ghazi Tractors, Hinopak Motors, Indus Motor and Pak Suzuki were the main contributors to this increase on assembler side. Agriauto Industries, Atlas Battery, Balauchistan Wheels and Exide Pakistan were the main contributors on the parts and accessories side.

TABLE -2

COMPANY

INCREASE IN MARKET CAPITALIZATION MILLION RS.

% INCREASE IN MARKET CAPITALIZATION

DIVIDEND PAID2005

EARNING DIVIDEND PAID2006

PRICE/
EARNING PER SHARE2006-07

RATIO
2007

AUTOMOBILE ASSEMBLERS

Al-Ghazi Tractors

6,311.65

101.38

350%

350%

RS. 28.63

10.20

Atlas Honda

2,112.80

28.04

60% 40%B

60% 15%B

13.46

15.16

Dewan Farooque Motors

(462.44)

(31.58)

15%

10%

0.79

16.46

Ghandhara Industries

730.90

445.99

Nil

35% 300%R

5.94

7.07

Ghandhara Nissan

1,485.08

206.25

12.50%

Nil

4.16

11.78

Ghani Auto Industries

70.00

46.67

Nil 100%R

4%

(1.97)

Negative

Hinopak Motors

6,129.13

470.72

60%

105%

26.12

22.93

Honda Atlas Cars

5,804.40

234.24

22.50%

70%B

(3.71)

Negative

Indus Motor

19,728.60

269.89

100%

120%

34.93

9.85

Millat Tractors

2,916.06

118.40

`150% 30%B

200% 20%B

33.98

8.45

Pak Suzuki Motor Co

23,459.51

413.41

50

50%B

61.99

5.71

Saif Nadeem Kawasaki

5.17

200.00

Nil

Nil

-

-


AUTOMOBILE PARTS & ACCESSORIES

Agriauto Industries

1,656.000

143.75

50%

70%

12.21

9.58

Allwin Engineering

(24.673)

(6.06)

10%

10%

0.05

620.00

Atlas Battery

729.799

206.14

25% 15%B

30% 15%B

14.39

10.77

Baluchistan Wheels

810.256

194.11

15% 15%B

25%

9.65

9.53

Exide Pakistan

767.609

218.46

10%

15%

16.95

12.21

General Tyre & Rubber

(298.857)

(15.15)

17.50%

20%

1.05

26.67

Transmission Engineering

45.000

-

Nil

Nil

(6.78)

Negative

Automotive Battery

94.766

128.57

Nil

Nil

0.74

43.24

Bela Automotive

(5.800)

(16.67)

Nil

Nil

0.25

20.00

Dewan Automotive Engg.

38.400

42.67

Nil

Nil

(15.30)

Negative

Total

72,103.37

178.73

       

PERFORMANCE MEASURED BY PAY OUTS

The dividend pay outs were quite high and in most cases justified the corresponding high share prices. Al-Ghazi Tractors, Atlas Honda and Millat Tractors proved to be the good pay masters on the assembler side. On the parts and accessories side, Atlas Battery's yield remained well above 15%. Agriautos, Balauchistan Wheels and Exide Pakistan paid nominal dividends but their EPS justified their share prices. Transmission Engineering's EPS was a high negative at (6.78). Automotive Battery, Bela Automotives and Dewan Automotive Engineering (previously Allied Motors) remained listed under the defaulter category with a nil pay out.

EARNING PER SHARE (EPS) AND PRICE TO EARNING RATIO (P/E)

Pak Suzuki Motor with an EPS of Rs.62 in 2006-07 was the star performers on assembler side. Al-Ghazi Tractors, Hinopak Motors, Indus Motor and Millat Tractors were the other good performers. On the parts and accessories side: Agriautos, Atlas battery, Balauchistan Wheels and Exide Pakistan were the top performers: the others either registered a negative EPS or reported very nominal earnings.

In case of Pakistan, a conservative view decrees that a P/E ratio or multiple of up to 10 is a safe bet. Judging on these criteria, on the assembler side, Al-Ghazi Tractors, Ghandhara Industries, Indus Motor, Millat Tractors and Pak Suzuki are in the comfort zone with Pak Suzuki outperforming all others. Atlas Honda and Dewan Farooque Motors and Hinopak Motors are trading at a comparatively high P/E multiple especially Hinopak Motors' P/E multiple of 23 coupled with a comparatively low pay out fails to make its' share an enviable possession. On the parts and accessories side, Agriautos, Atlas Battery and Exide Pakistan are found flirting with the comfort zone. Exide Pakistan's very low pay out may not attract new investors.

In the end, a word of caution; such analyses can not be termed conclusive. Several other factors, for example, the book value, the group reputation, the future outlook, the growth potential, etc. are also to be accounted for before making a final investment decision.