Karachi, July 25, 2023 (PPI-OT): HCAR_1QMY24 Result Review - Striking 'Other Income' rescues earnings

Honda Atlas Cars Limited (HCAR) announced its 1QMY24 results today where the company posted PAT of PkR145mn (EPS: PkR1.0) vs. LAT of PkR824mn (LPS: PkR5.8) in the previous quarter. Other income rescued the bottom-line despite the loss posted on gross level. These earnings beat the street consensus, which was anticipating a loss for the quarter.

Topline of the clocked in at PkR3.8bn in 1QMY24, a decline of 83%/88% on quarterly and yearly basis, respectively. This significant decline is majorly attributable to a dip in the sales volume, with the company selling only 601 units compared to the MY23 quarterly average of 6.4k units. To note, company's production plant remains shutdown for over 45 days due to restrictions on importing CKD kits.

On the gross level, company reported a gross loss of PkR148mn despite price increases in 4QMY23. The loss was majorly due to diseconomies of scale during the quarter. Operating expenses witnessed a decrease of 27%/28% QoQ/YoY, clocking in at PkR412mn, possibly due to lower advertising and sales promotion spending.

Other income saved face, amounting to PkR903mn, a quarterly and yearly increase of 32%/71%, respectively. The company's strategy of increasing investments in Government T-bills paid off well in rising interest rates. To note, HCAR doubled its ST investments on a YoY basis to PkR14.3bn in MY23.

Furthermore, finance cost of the company increased by 118%YoY to PkR44mn, primarily due to the rise in interest rates.