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Honda Pakistan Posts Huge Profit Despite Outrageous Car Prices

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Honda Atlas Cars Limited (PSX: HCAR) posted a profit after tax of Rs. 675 million in the quarter ended September 30, 2023 (2QMY24), compared to a loss of Rs. 385 million in the same period last year (SPLY), according to the notification filed by the car maker to the Pakistan Stock Exchange (PSX).

Honda Atlas Cars did not announce any dividend payouts for the period in review, in line with industry expectations.

The surge in profit was attributed to improved margins, which surged by 750bps on a YoY basis.

The sales of the company during the quarter fell by 28.6 percent year-on-year (YoY) to Rs. 13.9 billion from Rs. 19.5 billion recorded in the corresponding period last year. In April-September (half-year), the top line of the company arrived at Rs. 17.7 billion, declining by 64 percent on a YoY basis.

During Q2, HCAR sold 2,510 units, +4.2x QoQ due to lower base effect as the company did not witness any non-operating days during the quarter and was able to make deliveries.

The company reported a gross profit of Rs. 1.52 billion during the quarter under review, up by 127 percent YoY as compared to Rs. 673 million in SPLY. Meanwhile, the gross margin clocked in at 10.9 percent during the quarter, depicting an improvement of 750 basis points from gross margins of 3.4 percent posted in SPLY. According to Arif Habib Limited, this was attributed to augmented car prices coupled with lower commodity prices, especially steel.

Distribution and marketing costs decreased to Rs. 212 million in the quarter as compared to Rs. 216 million in the SPLY. The other income of the company increased by 14 percent to Rs. 896 million from Rs. 787 million in 2QMY23, amid an increase in short-term investments held by the company as compared to SPLY.

The finance cost of the company skyrocketed by a whopping 191 percent from Rs. 41 million to Rs. 120 million during 2QMY24. HCAR booked effective taxation at 55 percent during 2QMY24.

The company reported earnings per share (EPS) of Rs. 4.73 during 2QMY24 compared to a loss per share of Rs. 2.7 in SPLY.

HCAR’s scrip at the bourse closed at Rs. 198.05, up 7.5 percent or Rs. 13.82 with a turnover of 2.3 million shares on Wednesday.

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