Honda Atlas Cars: Gunning the engine in 3QFY12

Honda Atlas Cars (HCAR) posted its third quarterly results for FY13 on Tuesday, January 29, whereby its top line boasted a humungous boom of 78 percent YoY to tally Rs6.72 billion. The Company’s sizeable top line growth has gone against the tide in a sector where other players are not grappling well with the competition from imported cars.
Sales revenues have boosted on the heels of a new model of Civic launched during September 2012, which resulted in enormous growth of 49 percent YoY in total sales volume during October-December, 2012. Besides, the resurgence in production after last year’s flood in Thailand and conversion to EURO- II compliant cars have brought good tidings for the Company.
By comparison, Indus Motor Company and Pakistan Suzuki have been bashed by the termination of the Punjab Government Taxi scheme and termination of non EURO-II compliant cars like Cuore and Alto.
HCAR’s cost remained under pressure due to depreciation of the local currency against Japanese Yen and domestic inflationary pressures. However the increased cost burden was passed on to customers, taking vehicle prices up by an average of 19 percent, compared to the same period last year.
Consequently, the gross margin rebounded to five percent in 3QFY13, up from 0.42 percent last year, despite 70 percent surge in costs.
Distribution and administrative expenses soared by 41 percent during the period owing to the launch of the new model of Civic. Still, a boom of 1.45 times in other income due to factors such as profits on deposits, gain on investments and profits on advances to suppliers; kept operating margin intact which grew to three percent during October – December, 2012, up from negative three percent during the same period, last year.
All these factors translated into earnings per share of Rs0.57 in 3QFY13, as against loss of Rs0.81 per share during 3QFY12.
Monthly comparison reveals that sales remained depressed during December sliding by 39 percent MoM to 864 units as against 1,420 units in November which is indicative of the New Year registration trend as people continue to postpone their purchases of vehicles until January in order to get latest registration numbers.
That means sales in January will, in all likelihood, be even stronger than the recently concluded quarter.

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Honda Atlas Cars (Pakistan) Ltd.

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                               (Oct- Dec) (Oct- Dec)

(Rs mn)                            2012       2011        chg

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Sales                            6,722      3,777         78%

Cost of Sales                    6,405      3,761         70%

Gross Profit                       317         16       1895%

Distribution & Marketing Cost       50         34         45%

Other operating income              75         30        145%

Profit/(Loss) from operations      140        (99)

Finance Cost                        16         41        -60%

Profit/Loss after Taxation         123        (58)

EPS (Rs.)                         0.57       -0.81

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