Karachi, November 16, 2022 (PPI-OT): HCAR: 2QMY23 Result Review

Honda Atlas Cars Limited (HCAR) announced it 2QMY23 result today where it posted LAT of PkR385mn (LPS: PkR2.7) compared to profit of PkR658mn (EPS: PkR4.6) in the first quarter. This brings cumulative earnings for 1HMY23 to PkR273mn (EPS: PkR1.9). The performance in the quarter is well below industry expectations due to a taxation charge of PkR544mn, culminating to an ETR of 342% for the quarter.

Revenue for the quarter has decreased by 35%QoQ to reach PkR19.5bn, while also down by 25%YoY. The decline is due to the curb on the imports of CKD kits, with offtakes down by 40%QoQ and 39%YoY. Despite announcing hiked prices in August, the prices could not come in effect in the current quarter.

Discounts to customers boosted by markup on late deliveries is likely to have dented net sales along with margins. Gross margins in 2QMY23 clocked in at 3.4% in contrast to the 6.3% recorded in the first quarter of the year. Significant currency depreciation along with sky high inflation have caused the per unit COGS to increase.

Other Income has beaten expectations, likely due to accumulation of Cash and ST investments in the quarter along with higher interest rates. PkR788mn was recorded for 2QMY23, up by 50%QoQ and 53%YoY.

Other expenses have remained flat QoQ, clocking in at PkR716mn for the quarter. The vast majority consists of exchange losses on the foreign trade payables, as the local currency suffered hefty depreciation in the quarter.

Taxation charge for HCAR has shot through the roof in this quarter, with an ETR of 342% likely on the back of an adjustment for the Supertax imposed on FY22. To note, we had assumed an ETR of 40% for the quarter, similar to that recorded in 1QMY23.