It is not like Atlas Honda (PSX: AHL) has no competition in the market. It does. But despite a wide variety of locally assembled two-wheelers in the market, Honda continues to maintain its lead position, never losing market share, rain or shine. Over the past year, this share has only grown. In the last recorded month for its marketing year, Atlas Honda sold 75 percent of the total local motorcycles in the country. Its financials reflect that position.
The company managed to bounce back from the covid-19 related slowdown in the market fairly unscathed. In the first half, net sales decreased due to the lockdowns earlier in the period but the full-year number more than made up for it bolstered by improved demand as well as higher prices for the same. In fact, it also increased prices for some of its motorbikes—resultingly revenue per unit sold (estimated) grew 9 percent.
Since price increases came for other brands too, it is unlikely that prospective buyers would shift brands based on price alone—in fact, Honda’s rising market share indicates that confidence in the brand has only grown. The company kept costs in check, though there were pressures from the first half of the year with costlier inputs due to supply shortages and higher prices (plus freight) of raw material imports. To an extent, a favourable rupee situation has been offset by higher inflationary scenario globally. Margin maintenance, however, has been done through relevant increases in prices.
Overheads as a share of revenue also declined to 3 percent compared to 4 percent last year which together with a whopping 27 percent of before-tax profit contribution coming from “other income” component sweetened the bottom-line considerably. The company’s borrowing cost as a share of revenue is miniscule given low debt levels and interest rates.
The management should be happy with such a symmetrical income statement and prudent decisions taken at the right time. Its dividend payout of 60 percent which is in line with tradition indicates the company is confident about the future.