HCAR_3QMY23 Result Review, (AKD Off the Analyst's Desk Jan 26, 2023)
AKD, Off the Analyst's DeskHCAR: 3QMY23 Result Review
Honda Atlas Cars Limited (HCAR) announced it 3QMY23 result today, where it posted exceptional returns culminating to a NPAT of PkR811mn (EPS: PkR5.7) compared to loss of PkR385mn (LPS: PkR2.7) in the second quarter. This brings cumulative earnings for 9mMY23 to PkR1.1bn (EPS: PkR7.6). The performance in the quarter is well above industry expectations due to a significant hike in gross margins, likely driven by higher effective prices after the revision in August, along with the launch of HR-V helping boost margins.
• Revenue for the quarter has increased by 17%QoQ to reach PkR22.9bn, while down by 22%YoY. While offtakes have remained relatively flat on a QoQ basis, the increase in effective prices has driven the jump in revenue on the quarterly basis.
• Distribution and marketing expenses have surprisingly remained flat QoQ despite the launch of a new product in the HR-V. Furthermore, the launch of the new product has also likely boosted margins, clocking in at 7.8% vs. the 3.4% recorded in the previous quarter. To note, the HR-V has contributed to 23% of the sales mix in volumetric terms.
• Finance costs for the company have spiked significantly in the quarter, clocking in at PkR318mn and amounting to roughly ~7x of the charge recorded in 2QMY23. While its possible that the company has taken on more ST debt in the quarter, we believe its likely that HCAR incurred hefty demurrage and detention charges due to consignments stuck at the port.
• Other Income has nearly halved compared to the last quarter due to lesser holdings in Cash & ST investments, clocking in at PkR325mn for the quarter. Other Expenses have dropped down to PkR76mn in the absence of exchange losses, given that the official USD/PkR parity remained unchanged QoQ.
• Taxation charge for HCAR has returned to normalcy after the Supertax charge incurred in the previous quarter, recorded at PkR369mn in the third quarter and culminating to an ETR of 31.3%
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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