PSMC: Inline to benefit from yellow cab scheme

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The Punjab Government has allocated Rs25bn in its FY15 budget to provide 50,000 yellow cabs.

§ Although details of the short-listed manufacturers are yet to be announced for the scheme, we see high probability of Pak Suzuki’s (PSMC) selection.

§ We believe until clarity emerges, parallels to FY12’s yellow cab scheme are inevitable. Punjab government had allocated Rs4.5bn to provide 20,000 yellow cabs in FY12, while short-listed Suzuki Mehran and Suzuki Bolan for the scheme.

§ We believe if short listed, the yellow cab scheme can lift PSMC 2014E/15F earnings by 13%/20% as earnings impact is likely to be spread over its Jan-Dec reporting period. On a standalone basis, our back-of-the-envelope working suggests annualized earnings impact of ~Rs10/share.

§ We reiterate our ‘Buy’ rating on PSMC with a Target Price of Rs240, where potential yellow cab scheme can lift our Target Price to Rs285.

Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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