As per the latest result announcement, Honda Atlas Cars Pakistan Limited (HCAR) has posted earnings of PKR 1,793mn (EPS: PKR 12.56), surging by 163% YoY in ME (March End) 21 compared to PKR 682mn (EPS: PKR 4.77) in SPLY. On a quarterly basis, the company posted a profit of PKR 895mn (EPS: PKR 6.27) compared to a loss of PKR 28mn (LPS: PKR 0.20) and a profit of PKR 752mn (EPS: PKR 5.26) in 4QME20 and 3QME21, respectively.

Result Highlights

· Topline of the company increased by 22% YoY during ME21 due to higher vehicle prices and an increase in sales volumes by 7% YoY to 24,027 units compared to 22,407 units in ME20. On quarterly basis, HCAR recorded net revenue of PKR 22.8bn in 4Q, up by 45% YoY / 29% QoQ due to volumetric growth of 36% YoY / 29% QoQ to 8,032 units (Civic/City: 6,858 units; BR-V: 1,174 units).

· Pertinently, margins dropped to 5.18% in 4QME21 vs. 5.62% in 4QME20 (3QME21: 6.52%). Despite the appreciation of PKR, the decline in margins came on account of higher duties and a surge in prices of imported raw materials (steel).

· Meanwhile, other income surged by 21% YoY to PKR 517mn due to an increase in short term investments and cash and bank balances.

Recommendation:

· As per our sources, the launch of new Honda City is going to be a key catalyst as the company is already receiving an overwhelming response from customers and has already received three months booking (approximately 6,000 units), with the first unit being expected to roll out in August’21. Currently, we have a ‘Hold’ call on the stock with a Dec’21 target price of PKR 363/share.

Courtesy – AHL Research