HCAR: becoming stronger

The outgoing year for Honda (PSX: HCAR) was a pretty good one but the company outperformed itself in its first quarter ending June 2017 by achieving double the revenue this year. The company’s launch of the 10th generation Civic remains popular while it also came up with a mid-cycle makeover of the Accord. The company also launched a 7-seater SUV called the Honda BR-V that is catering to a niche market but providing a healthy diversity to the sales mix of Honda.

Honda sold over 2,200 more City and Civic cars during the outgoing quarter compared to this period last year, while selling an additional 2,000 BR-V during the period. While gross margins remained at 14 percent—15 percent last year as costs increased in the same proportion as sales; the profit margin remained the same at 10 percent likely due to a strong boost in its other income.

Other income during the period was 2 percent of revenues against one percent last year which made all the difference. Meanwhile, indirect expenses including marketing, distribution, administrative and other expenditure remained 3 percent of the revenues for the period without change from last year.

After-tax profit nearly doubled also clocking at Rs2.08 billion—as a result, the EPS has grown from Rs7.4 to Rs14.61 and the company announced a cash dividend of Rs4.18 per share i.e. 41.8 percent.

Honda’s playing a solid game—it closed off the FY17 with a greater market share—18 percent against 12 percent in FY16, as Suzuki’s share decreased with the Apna Rozgar Scheme wrapping up. Going forward, once the orange cab by the Punjab Government is launched, Honda may lose a bit of this market share if the three carmakers are looked at together, but in its own league of cars—since Suzuki is less of a competition—it will stay strong.

Honda is also heard to be working on double shift to produce more cars to cater to the rising demand. Introducing timely face-lifts and new variants at a time when new automotive ventures are vying to enter the market is the right push from Honda. Keep at it.