Resuming Coverage with a TP of PKR 331.40
We are resuming coverage on Honda Atlas Cars (HCAR) with a June 2019 target price of PKR 331.40. Our new target price offers a 57% upside to the stock’s last closing price, hence we are adopting a positive stance on HCAR. We believe that the company is currently going through a tough operating environment, but we still believe that it is a good investment as the market appears to have over-reacted to its issues. We are assuming that gross margins will remain restrained in the future at a level of 8.2% to 8.7%. Further we are assuming that sales will rise slightly after taking a hit in the Dec 2018 quarter (due to the non-tax filer issue), but they will be unable to rise to the FY18 level because of upcoming new entrants. For the September quarter we are expecting HCAR to post an EPS of PKR 8.07.
Honda Atlas Cars (Pakistan) Limited. Honda Atlas Cars (Pakistan) Limited is engaged in assembling and progressive manufacturing and sale of Honda vehicles and spare parts. The Company's segments include Manufacturing and Trading. The Company's Manufacturing segment relates to the sale of locally manufactured cars and parts. The Trading segment relates to the trading of completely built units (CBUs) and parts. The Company's factory is located at Multan Road, Manga Mandi, Lahore. The Company offers car models, such as Honda Accord, Honda CR-V, Honda CR-Z, Honda HR-V, Honda Civic (over four models), Honda City Aspire (over four models) and Honda City (over four models) in various colors with a range of technology features. The Company's cars are available in colors, including crystal black pearl, bold beige, taffeta white, urban titanium, modern steel metallic, habenaro red, alabaster silver metallic, camelian red pearl and white orchid pearl. The Company is a subsidiary of Honda Motor Co., Ltd., Japan.
Ismail Iqbal Securities (Private) Limited (IISPL) is a TREC holder of the Pakistan Stock Exchange, as well as an SECP registered Underwriter and Book Runner. IISPL provides comprehensive financial services including Equity Sales, Research on Equities and the Macro-Economy, Investment Advisory, Portfolio Management, Corporate Finance, and extensive services for Private Equity investors. IISPL services a diversified client base, from Institutional to Retail Investors including High Net worth Individuals.
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