Atlas Honda eyes $25m in exports

Despite challenges, declares interim cash dividend of Rs24/share for year

KARACHI:

Atlas Honda Limited (ATLH), a leading motorcycle manufacturer in Pakistan, is optimistic about its export prospects and projects an export revenue of nearly $25 million for March FY24 (MY24), which spans from April 1, 2023, to March 31, 2024.

During a corporate briefing, the company presented its financial performance for the previous fiscal year, MY23, and shared its outlook for the future. Despite facing economic challenges, the company recorded earnings of Rs40.33 per share in MY23, compared to Rs45.01 per share in the previous year. Nonetheless, ATLH declared an interim cash dividend of Rs24.0 per share for the year.

According to a Taurus Securities report, ATLH managed to achieve sales revenue of approximately Rs135 billion, reflecting a 3% year-on-year increase. However, the Profit After Tax (PAT) declined by 10% compared to the same period last year, reaching around Rs5 billion.

During MY23, the company faced a decline in sales volume, consistent with the industry’s overall downturn of about 26% in the motorcycle and three-wheelers segment. Economic headwinds affecting purchasing power were primarily responsible for this decline, leading to a 20% reduction in ATLH’s sales volume.

Despite these challenges, the company’s management remains optimistic about future sales volume projections. They aim to maintain sales volume above one million units in MY24, while the industry volumes are expected to range from 1.3 to 1.5 million units, according to Auto analyst at Ismail Iqbal Securities, Muhammad Saad Imran.

ATLH has garnered an increased market share due to the exit of several Chinese players from the market. However, the overall reduced demand remains a concern for the company.

To sustain growth and explore new markets, automobile industry expert Mashood Ali Khan recommends that the company explores export opportunities in countries like Iran, Iraq, and Afghanistan for motorcycles. Speaking to The Express Tribune, Khan acknowledges the challenges posed by banking inefficiencies in these regions, suggesting that transactions may occur through the barter system.

During the year, the company has successfully enhanced its production capacity to 1.5 million units per year. Moreover, it maintains a significant localisation level, with 94.4% for CD70, 92% for CG125, and 84.3% for Pridor models.

ATLH has assured that it possesses sufficient raw materials for the upcoming quarters, offering some respite from the current raw material importation challenges faced by many industries. Approximately 70% of the major raw materials, including steel sheets, aluminium, zinc alloy, and nickel, are sourced locally, while materials for engine manufacturing are imported.

Despite concerns about potential electric vehicle (EV) bikes in Pakistan, the technology’s feasibility and current limitations in terms of cost and global lithium supply have raised doubts. Currently, EV bikes in the country rely on lead-acid batteries, which have their limitations.

While the company looks forward to exploring new export markets, Sabir Shaikh, Chairman of the Association of Pakistan Motorcycle Assemblers (APMA), in an interview with The Express Tribune raises concerns about the sustainability of export growth. He points out that consistency in the company’s operations remains uncertain, making it challenging to predict the continuation of this export surge.

The localisation claims made by the motorcycle industry are also questioned, particularly in light of recent government restrictions on imports. The resulting increase in motorcycle prices has raised doubts about the extent of true localisation in the industry.

ATLH’s future performance will undoubtedly be influenced by the evolving economic landscape and industry dynamics. The company remains hopeful about navigating challenges and capitalising on potential export markets to sustain growth in the coming fiscal year.

Published in The Express Tribune, July 20^th, 2023.

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