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Honda Atlas Cars (HCAR): 1QMY20 EPS Rs1.69, down 77% YoY (Below expectations)

• Honda Atlas Cars Limited (HCAR) posted 77% YoY decline in its 1QMY20 earnings where EPS clocked in at Rs1.69. Significant decline in earnings was mainly due to massive reduction in Revenue by 25% YoY.
• Revenues were down as volumetric sales of the company witnessed decline of 33% YoY during 1QMY2019. Overall units sold during the quarter were 8,346 units vs. 12,481 in same period last year.
• Different variants of HCAR witnessed price increase in range of 8-23% over previous quarters due to 1) increase in PKR/USD exchange rate by 14% in 1QMY20, 2) advance custom duty of 5% on raw material & 3) imposition of FED.
• Other Income has witnessed material decline of 61% YoY mainly due to low income from bank deposits as the company has reduced cash balance in is accounts after decline in advance payments of customers.
• We expected turnover tax to be applied for this quarter result, but as per our channel checks company will consider results of upcoming quarters anticipating improvement which might not lead to impose turnover tax.
• Other operating expense increased by 1.1x YoY due to exchange loss recorded by company, we believe.
• Key risks to company includes 1) Further PKR depreciation 2) slowdown in economy and 3) Entry of new auto players.