Honda Atlas Car (HCAR) conducted a corporate briefing on MY23 performance to discuss current and future operational dynamics.

HCAR will increase car prices in case of further rupee devaluation or additional tax hikes. To note, around 90% of total cost is derived from raw material cost, where 60-70% of total raw material cost is exposed to US dollar fluctuations. The current car prices are currently set at around Rs287.

Management stated that LCs are being opened as banks now have to arrange dollars.

HCAR’s management anticipates that car sales will increase compared to last year, provided there are no restrictions on LCs imports. To note, in MY23 HCAR sold 25,726 units compared to 37,613 units in MY22.

HCAR launched the all-new HR-V model in MY23, and the company is experiencing an overwhelming customer response.

Going forward, HCAR plans to launch hybrid vehicles in Pakistan.

Localisation levels for different HCAR models are as follows: Civic 61%; City 71%; BRV 55%; and HRV 52%.

HCAR recorded an exchange loss of Rs4.5bn in MY23.

HCAR’s gross margins in 4QMY23 clocks in at 12% vs 9MFY23 of 6%. The management clarified that the margins from the last quarter are not sustainable because of the year-end adjustments made during that period.

The regulatory factors that affected company operation last year included (1) restriction by SBP on the import of raw material, (2) increase in advance tax, (3) imposition of super tax, (4) input tax adjustment, and (5) imposition of 1% CVT on sales of cars.

To recall, HCAR recorded earnings of Rs1.8/share, down 90% YoY in MY23. The decline in earnings is due to lower volumetric sales, exchange loss, and super tax.

Courtesy- Topline Securities