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Honda’s Profits Rise by 82% Thanks to Higher Margins

Honda Atlas Cars Pakistan Limited (PSX: HCAR) on Thursday announced its financial results for the 3rd quarter that ended on December 31st, 2022, wherein the company’s profits increased by 82 percent to Rs. 810 million from Rs. 445  million recorded in the same period last year.

The significant surge in profit during the third quarter was because of improved margins, which were recorded up by 440bps on a sequential basis, according to Arif Habib Ltd. This took the nine months’ profits to Rs. 1.08 billion, down by 53 percent as compared to Rs. 2.31 billion recorded in the same period last year.

The company reported earnings of Rs. 5.7 per share in Q3 as opposed to Rs. 3.12 per share in the previous year. The company has not announced a cash dividend this quarter as part of its strategy to announce dividends in the last quarter.

The net sales of the company decreased by 22 percent to Rs. 22.9 billion, from Rs. 29.5 billion due to a decline in volumetric sales.

The gross margins of the company stood at 7.8 percent as compared to 2.7 percent in the same period last year depicting an improvement of 550 bps. This was attributed to augmented car prices coupled with lower commodity prices, especially steel. For similar reasons, margins jumped up over the last quarter.

Other income went down by 39 percent YoY to Rs. 325 million, as the cash and short-term investments held by the company declined during the period under view. While the effective tax rate came in at 31 percent during the quarter.

At 3 PM, the company’s scrip at the bourse was Rs. 140.4, up 3.3 percent or Rs. 4.5 with a turnover of 190,735 shares on Thursday.

Price Hike

HCAR recently increased the prices of its cars by up to Rs. 550,000. After the recent price hike, Honda’s cheapest car now costs over Rs. 4 million, while its flagship sedan, Honda Civic, costs up to Rs. 8.1 million.

Furthermore, the automaker is still observing non-production days (NPD) which has stifled its sales further. Given the crippling inflation and the production hiccups, HCAR’s is likely to struggle in H2 FY 2022-23.


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