Honda Atlas Cars Pakistan – A performance review

Honda Atlas Cars Pakistan Limited (HCAR) held an analyst briefing held recently to discuss its financial result for 1QME21 and outlook.

• During 1QME21, the company posted loss after tax (LAT) of PKR 511mn (LPS: PKR 3.58), compared to profit after tax (PAT) of PKR 242mn (EPS: PKR 1.69) in 1QME20 and loss after tax of PKR 28mn (LPS: PKR 0.20) in 4QME20, respectively.

• HCAR recorded net revenue of PKR 6,512mn in 1Q, down by 64% YoY / 58% QoQ due to volumetric decline of 72% YoY / 61% QoQ to 2,329 units (Civic/City: 2,102 units; BR-V: 227 units).

• Management expects company to witness volumetric growth in ME21 and ME22 after easing of lockdown situation and decline in novel coronavirus cases.

• Decline in policy rate is blessing for automobile sector and management believe lower auto financing rate will increase demand. Currently, auto financing accounts for 20% of the sales and this ratio is expected to increase to 30%.

• Approximately, company have backlog orders around one month of its sales.

• As per management, rural area accounts for approximately 40% of total automobile sales.

• Management told that they do not have capacity to produce diesel engine cars and no new car launch expected till the recovery on economy in full swing.

• Current localization of BR-V is 40% while Civic/City localization is around 60%. Company prefer locally produce parts but they cannot compromise on the quality.

• Management believe, we will be able to reduce short term borrowing in the period under review by minimizing our current inventory levels.

• As per management, launch of Toyota Yaris is giving tough competition to Honda City and management is planning to come up with better policy.

• In a question regarding new Electric Vehicle (EV) policy, company is waiting for EV policy and they will come up with the plan after reviewing the new policy. (AHL Research)

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