Honda Atlas Cars (Pakistan) Limited held its corporate briefing session today to discuss the key outcomes of 4QMY21 and MY21 result. To recall, the company posted a PAT of PKR 896Mn (EPS: PKR 6.3) in 4QMY21, compared to LAT of PKR 29Mn (LPS: PKR 0.2) and PAT of PKR 752Mn (EPS: PKR 5.3) in 4QMY20/3QMY21, respectively. On an annual basis, HCAR posted PAT of PKR 1.79Bn (EPS: PKR 12.6) in MY21, compared to PAT of PKR 0.68Bn (EPS: PKR 4.8) in SPLY. Moreover, the company announced a dividend of PKR 4.5/sh for MY21. Key highlights of the session are discussed below:-
During MY21, the company sold 24,027 units (↑7.2% YoY), while production totalled 23,479 units (↑3.3% YoY). The increase in sales was mainly on account of lower financing rate and post covid economic rebound.
Net sales clocked in at PKR 67.4Bn in MY21 (↑22% YoY) on the back of volumetric growth in sales quantity (↑7.3% YoY) and hike in ex-factory prices.
The gross margins declined to 5.6% in MY21 from 7.4% in SPLY, mainly of account of higher freight charges, input and fixed costs.
The capacity utilization of the company increased to 47% in MY21 compared to 45% in MY20
Despite the company’s attempt to reduce exchange rate sensitivity on auto parts of its CKD models, the localization level of the Honda City, Civic and BRV are ~71%/58%/51% respectively.
The share of auto financing was 48% for HCAR’s sales during the year. As vehicle prices keep soaring, the share of auto financing is expected to grow as percentage of sales. A hike in policy rate may prove detrimental to the sector.
The management plans to unveil the much anticipated new model of Honda City on 29th July 2021. To cater to the expected surge in demand of the new model, the company has been operating on double shift basis and has increased dealer network to 59 outlets in all major cities of the country.
The management expects to sell ~8,500 – 9,000 units in upcoming quarters. The downside risk to these production figures are higher raw material prices (steel, aluminium, plastic resin, etc), shipping/container costs and semiconductor chip shortage, which have not slowed down.
The company lowered the ex-factory prices of its vehicles after removal/reduction of ACD and FED in the annual budget. However, if raw material and shipping expenses fail to stabilise, the company may hike prices down the line to ensure stable margins.
With respect to the incentives on hybrid vehicle in Auto Policy (21-26) and the upbeat SUV market, the management is evaluating their entry in the SUV market and will notify when they are ready.
Courtesy – BMA Capital Management Ltd.