To recall, Honda Atlas Car (HCAR) announced its 1QMY23 profit of Rs658mn (EPS: Rs4.6) against profit of Rs928mn (EPS: Rs6.5) in SPLY. The decrease in earnings was attributable to PKR devaluation, higher material prices, and higher freight cost.

Company has recently increased the prices by 22%-24% due to steep devaluation inline with other industrial players. To note, company has set the prices on PKR/USD parity of 235. That said, company expects gross margins to be in the range of 3%-3.5% as they have not fully transferred the cost pressures to consumers and are taking a hit.

Management disclosed localization levels (In parts terms) of their products; City has achieved localization level of 70%, Civic 60%, and BRV 50%. However, in value terms, number reduced to 25%-30% due to absence of auto grade steel industry and high-end technology which requires consistent policy and heavy investment. As per company, they have localized all parts which are possible to be localized in Pakistan.

The management shared that their currency exposure is around 70% which is line with import of raw material.

Previously, more than 40% cars sold used to be purchased on consumer financing but due to rapid increase in interest rates and SBP amendments on auto financing tenure, this has reduced to 30%. Additionally, 65% of their total sales comes from urban regions.

Regarding CKD imports, company has said SBP has given them quota and according to this, they can import 60% of 4 months average kits imports in August. Till now, they have observed 2 NPD (Non-Productive Days).

Company has confirmed the news flow regarding the launch of HRV and as per them, they will make public announcement soon.

Going forward, FY23 is expected to be a tough year where a decline of 25-35% in auto industry is on the cards. HCAR is optimistic and they intend to reduce this gap with the launch of their new car.

Courtesy – AHCML Research