Pakistan Auto Sector Earnings Jump 31% YoY — Revenue Surge, But Stocks Lag Market
The Pakistan Auto sector posted earnings of Rs22.6bn in 2QFY26 compared to Rs17.3bn in the same period last year, up 31% YoY. The earnings growth is mainly attributable to the revenue growth of 43% YoY to Rs250bn on the back of better capacity utilization and new model launches.
According to LSM data, the Auto industry manufactured 50k units of cars and jeeps in 2QFY26 versus 33k units in the same period last year, up 51% YoY (PAMA sales stood at 46k, up 39% YoY).
Despite significant growth, the sector posted a return of 8% versus the benchmark index return of 17% in FY26TD. The sector is currently trading at a lower P/B of 2.3x (may be due to emerging risks related to PKR, part supply, and higher interest rates) compared to a P/B of 3x in the previous quarter (Dec’25). GAL & GHNI outperformed the sector.
Among the industry, GAL & GHNI posted the highest earnings growth of 166% YoY & 78% YoY to EPS of Rs22 & Rs27 respectively. The earnings growth was largely attributable to consistent demand in the truck & buses segment, where both companies sold a combined 1,557 units (up 92% YoY) due to increased economic activity, further supported by decent numbers of ISUZU D-Max and JAC T9.
At the same time, SAZEW posted earnings growth of 67% YoY to EPS of Rs 66.6. The growth is mainly attributable to the contribution from HAVAL PHEV; according to our estimate, the newly launched variant contributes around 35% to the sales mix.
Current P/B of 2.3x. The industry currently trades at 2.3x P/B, at a discount to its 10-year average of 2.7x. SAZEW trades at 3.3x P/B versus a 10-year average of 2.5x, and GAL trades at 1.1x versus a 10-year average of just 0.9x.
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However, both companies have undergone fundamental business transformation driven by new model launches that have structurally re-based their revenue and earnings profiles.
A higher structural P/B for these names is not a premium; it is the market correctly pricing in an improved and more durable earnings base. HCAR at 0.9x (vs 2.4x 10-year average) and HINO at 1.2x (vs 2.4x 10-year average) remain below historical averages and look inexpensive in context, though the rerating case there is more dependent on volume recovery than new launches.
INDU and GHNI are trading at or near their 10-year averages of 2.1x and 1.7x, respectively, offering relative stability and upside relative to the broader industry P/B. On the other side, NPL and NCPL, companies with significant auto exposure, trade at 0.7x and 0.9x P/B, respectively, offering deep value entry points for investors seeking indirect auto exposure at a discount.