Founded in 1920 and floated on the Casablanca Stock Exchange since 1941, Auto Hall is one of the leading Moroccan operators in the automotive equipments imports and distribution sector. The group operates in five main business segments: 1) passenger cars, where the company distributes the Ford and Mitsubishi brands and where it also operates as an agent retailer of Fiat cars in some regions of Morocco with a market share of 11%; 2) light commercial vehicles, where the company distributes Ford, Mitsubishi and Fiat cars with an estimated market share of 26%; 3) industrial vehicles, where Auto Hall is the exclusive seller of the Fuso and Ford Trucks brands with a market share of 42%; 4) agricultural equipment, where the company distributes New Holland equipment with an estimated national market share of 18%; and 5) industrial and construction equipment, where the company has a portfolio of distributed brands, like Case, Ammann and Cummins.

Auto Hall owns an extensive distribution network and has an ambitious enlargement policy, with the goal to have 100 operational sites by the end of 2020, compared to 36 in 2014. The main shareholders of the company are Groupe Amana (51.3%), Caisse Interprofessionelle Marocaine de Retraites (13.3%) and Hakam Finance (8.9%). Its free float is estimated at almost 25%.

Commercial Story

Over 2014, Auto Hall revenues decreased by 2% due to the strong drop in agricultural vehicle revenues, which declined 58.5% following the decision of Auto Hall to withdraw financing to their clients in this segment. This decline was offset by a strong commercial performance rising the group’s market shares in other business segments. Indeed, the group outperformed the market in passenger cars, where volumes increased by 8.8%, compared to 1.4% for the industry, leading to a stronger market share of 11%. In light and commercial vehicles, Auto Hall’s volumes decreased by 3.6% to 3227 units, representing an almost unchanged market share of 26% and counterbalancing a 19% drop in the first half of 2014 with a 23% increase over the second half of 2014. Furthermore, the group outperformed the sector in the industrial trucks segment, increasing volumes by 2.7% during a 5.2% drop for the industry, leading to a 42% market share, up 3 points. This performance was driven by the introduction of the new “Ford Trucks” brand in 2014.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) decreased by 16% to Dh383m (€41.7m), or an EBITDA margin of 11.3%, compared to 13.1% in 2013. This was due to a slight decrease of gross margin by 30 basis points to 19.7%, and an increase of other expenses and external expenses of 141% and 37%, respectively. EBIT stood at Dh333m (€36.2m), amounting to an EBIT margin of 9.8%. Finally, net income increased by 1%, supported by a lower financial loss of Dh9m (€972m) compared to Dh61m (€6.6m) in 2013, as the company enjoyed favourable exchange rate movements over 2014. It is worth noting that, in November 2014 Auto Hall signed an exclusive distribution contract with Nissan in Morocco.

Strategic Development

In 2015 Auto Hall’s revenues are expected to increase by 22.7%, thanks to the integration of the Nissan brand that could bring Dh730m (€79.4m) and the expected improvement of the group’s market share in all its business segments. In addition to the marketing of new models in passenger cars in 2015, we also expect a slight improvement in agricultural vehicles, driven by the good agricultural crop season. Auto Hall’s EBIT and net income should increase by 27% and 24%, respectively, reaching Dh481m (€52.3m) and Dh307m (€33.4m) due to the improvement of the group’s gross margin, which is being driven up by the decline in the euro/Dh exchange rate, leading to EBIT and net margins of 11.6% and 7.4%, respectively. We have a “buy” recommendation on Auto Hall, with a target price of Dh109 (€11.85) per share. The group represents our preferred stock in the automotive distribution sector in Morocco, thanks to the resilience of its commercial performance in 2014 and the anticipated recovery of car sales in the kingdom in 2015, driven by more favourable economic conditions.