Honda Atlas Cars Limited (HCAR) posted a profit after tax of Rs197 million for the fourth quarter ended March 31, 2022, down 78% as compared to Rs895 million in the same period of previous year.
“The result is below our expectations, which is mainly due to higher-than-expected distribution costs and effective tax rate,” Ismail Iqbal Securities auto sector analyst Muqeet Naeem said.
Talking to The Express Tribune, Topline Securities senior research analyst Sunny Kumar said that the result came below expectations due to the lower-than-expected gross margins.
The primary reason for the decline in gross margins included the rupee devaluation besides the jump in steel prices, he said, adding that net sales increased due to a jump in volumetric sales.
“The company sold 37,603 units during the year ended March 31, 2022.” Earnings per share for the year stood at Rs17.58, up 40%.
Alongside the result, the company also announced a cash dividend of Rs7 per share, in line with expectations, said Naeem.
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“Topline of the auto company arrived at Rs30.8 billion (in line with expectations), up 4% quarter-on-quarter, led by the sequential increase in car prices and commencement of delivery of new Civic in March 2022.”
Gross margins came in at 4.5%, against expectations of 5.6%, up 1.8 percentage points quarter-on-quarter as the increase in car prices in November 2021 were reflected in the quarter under review, he said.
Distribution cost rose by 2.38 times to Rs613 million (highest ever), “which might be due to the marketing cost of the new Civic,” he said. Effective tax rate came in at 76.1% as compared to 30.4% in the previous quarter.
As per the latest data available for April 2022, Pakistan’s auto sector saw a major drop of 18% in passenger car sales to 22,370 units.
It was the second considerable drop in the year. The decline was expected owing to the restrictions imposed on car financing and ever increasing rates of taxes on imports at the beginning of this year, he said.
The government had discouraged customers from buying cars in an attempt to avoid depletion of foreign exchange reserves, “as the country assembles vehicles through imports”.
The State Bank of Pakistan (SBP) has reduced auto financing tenure in line with the government’s aim to arrest the fast depleting foreign exchange reserves.
Besides, a huge appreciation in the US dollar against the rupee made imports more expensive and encouraged carmakers to increase prices. This also caused a drop in the sales.
Published in The Express Tribune, May 27th, 2022.
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