Topline Pakistan Research has reviewed the performance of Honda Atlas Cars (HCAR) for the period ending in 1QMY26. The company reported an earnings per share (EPS) of Rs5.8, which represents a 4.1 times increase year-on-year (YoY). However, this result fell short of industry expectations.
In its announcement today, Honda Atlas Cars Pakistan (HCAR) recorded a profit of Rs828 million (EPS of Rs5.8), showing a 4.1 times increase YoY but down 51% quarter-on-quarter (QoQ). The lower-than-expected results were primarily due to disappointing gross margins and a higher-than-anticipated effective tax rate.
Key details include:
– Gross margins were reported at 8.6% in 1QMY26, compared to 6.33% in 1QMY25 and 10.1% in 4QMY25. The improvement from last year was driven by a recovery in the auto sector and increased sales volumes.
– The effective tax rate stood at 43.29% in 1QMY26, higher than expected, compared to 47.14% in 1QMY25 and 39% in 4QMY25.
– Net sales reached Rs26.5 billion, an increase of 66% YoY, but down 4% QoQ, attributed to a 68% YoY increase and a 3% QoQ decrease in units sold, totaling 5,520 units in 1QMY26.
– Distribution expenses rose by 35% YoY but fell 36% QoQ to Rs350 million, attributed to the increase in sales volume.
– Administrative expenses and other operating expenses increased by 54% and 6.3 times YoY, respectively, while remaining flat and increasing by 6% QoQ.
– Other income surged by 61% YoY and 49% QoQ to Rs553 million.
Profitability is expected to improve in the upcoming quarters, particularly with the launch of the e:HEV HR-V model.
We maintain a HOLD stance on HCAR, as the company currently trades at P/E multiples of 11.6x for FY26E and 10.5x for FY27F, with a dividend yield of 4% for both FY26E and FY27F.
