HCAR starts year on a depressed note


– Honda Atlas Cars (HCAR) announced its financial results earlier today, posting a loss of PKR 511mn (EPS: PKR -3.58) during 1QMY21 compared with earnings of PKR 242mn (EPS: PKR 1.69) during 1QMY20. Profitability attrition can largely be attributed to subdued sales during the period under review.

– HCAR’s revenues eroded by 64% YoY to PKR 6,512mn during 1QMY21 largely due to subdued sales as Civic & City sales fell by 70% YoY to 2,102units while BR-V sales declined by 83% YoY to 227 units. Note that the company was significantly affected by the coronavirus-led lockdown with its assembling facility remaining shut down for several weeks during the quarter.

– The company’s gross margins declined by ~7pps to 0.8% during 1QMY21 largely on account of low sales, causing its fixed costs to spread out over a smaller number of units.

– Other expenses tapered off by 83% YoY PKR 126mn largely due to a lower quantum of exchange losses as bulk of the Pak Rupee depreciation had taken place the preceding financial year.

– Other income for the company also eased off by 48% YoY to PKR 91mn likely due to lower effective interest rates during the quarter, subduing treasury income from its cash balance and short-term investments.

– Onwards, we can expect the company’s profitability to recover as sales improve post the easing of lockdown restrictions. Moreover, the company’s outlook can greatly benefit from lower interest rates, potentially driving  sales via car financing.

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Please find attached the detailed report.

Kasb Research
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