July 28, 2014

Growth

AUTOMOTIVE IN FOCUS

HONDA ATLAS CARS (PAKISTAN) LIMITED

~1QFY15 Result Update Exceptional growth to start the year

SUITE # 204-205, 2nd Floor, Business & Finance

Center, Opp State Bank of Pakistan, I.I.
Chundrigar Road Karachi,
PABX: 9221-32461468-70
Fax: 9221-32473951
www.pearlsecurities.com

Key Data

24-Jul-14

KATS Code

HCAR

Market Price (PKR)

113.16

Market Cap (PKR mn)

16,159

52 w eeks dailiy volumes (m)

0.43

52 w eeks High/Low (PKR)

116.35/36.10

3 Months High/Low (PKR)

116.35/64.97

3 Months dailiy volumes (m)

0.74

Free Float (%)

20.00%

Outstanding Shares (m)

143

Weight in Index (%)

0.23

1Q Unit Sales

3,000
2,500
2,000

750

1,500
1,000

1,566

1,389

1,200

500

Honda Atlas Cars (Pakistan) Ltd. has announced exceptional results to start of the new
rd
fiscal cycle. Financials revealed on the 23 of Jul14 show outstanding PAT growth of
92% YoY. Improved volumetric sales of new Honda Civic and City models is backed by
PKR appreciation and controlled operational costs. PAT for 1QFY15 is registered at PKR
630mn (EPS: PKR 4.41), an increase of 92% YoY against earnings of PKR 328mn (EPS:
PKR 2.29). In anticipation of solid results, the companys stock has appreciated
th
remarkably by 22% during Jul14, reaching a high of PKR 113.16 on the 24 of Jul14.

Improved volumetric sales and favorable exchange rate

Exceptional core operations are witnessed during the period. Top-Line has expanded
notably due to improved unit sales of new Civic and City models while PKR appreciation
against JPY has reduced COGS. During 1QFY15, the company was able to sell 6,882
units of both Civic and City models, 6% YoY greater year over year. Better unit sales and
higher prices allowed for net sales to clock in at PKR 11.29bn, an increase of 3% YoY.
Cost of sales are reduced to PKR 9.86bn, down by 2% YoY, in large supported by PKR
appreciation against JPY of 3% over the term under review.
Sales of Civic model have lagged slightly during the period under review, however, high
demand of City model resulted in overall better unit sales. A total of 2,727 units of Civic
model were sold, showing a decline of 12% YoY. On the other hand, the new City model
has gained substantial popularity with a total of 4,155 units sold in 1Q, up by 23% YoY.

1,106

871

Synopsis

Profit margins enhanced

0
Apr'14

May'14
City

Jun'14

Reduced core and other operational costs allowed for better utilization of Top-Line
resulting in significant improvement in gross and operating profits. Gross margins are
calculated at 12.7%, showing outstanding appreciation of 509bps YoY, resultantly gross
profits have reached PKR 1,430mn, up by 73% YoY. Other operational costs were also
controlled while better other income, up by 11% YoY allowed for operating margin of
11.3%, showing remarkable improvement of 520bps YoY, resultantly operating profit of
PKR 1,277mn is achieved, an increase of 91% YoY.

Civic

HCAR Vs. KSE-100

Relative analysis

250
220
190
160

Market Performance

130
100

Research Department
research@pearlsecurities.com
Contact: +9221-32466210

Jul-14

Jun-14

Apr-14

HCAR

May-14

Mar-14

Jan-14

KSE-100

Feb-14

Dec-13

Oct-13

Nov-13

Sep-13

Jul-13

Aug-13

70

With strong performance in FY14 and exceptional 1QFY15 sales and macro positives,
HCARs stock has outperformed the market observing price change over a period of 52weeks. The scrip has appreciated remarkably by 142% to reach a high of PKR 116.35 on
rd
the 23 of Jul14 against price of PKR 48.17 at the start of the period.

Dividend Expectations
Due to losses suffered between FY09-12, the company refrained from issuing any
rewards to investors and focused on reviving operations. Since coming into profits in
FY12, the company has issued cash dividend of 3% in FY13 and cash dividend of 30% in
FY14. As performance is expected to be strong in FY15, management is likely to issue a
cash dividend of 30-40% for the year.

This report is prepared by Pearl Securities Limited and is provided for information purposes only. Under no circumstances is to be used or considered as an offer to sell or solicitation of any offer to buy. While all reasonable care has been taken to
ensure that the information contained in this report is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The material contained in this report
is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of
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Pearl
Research
available on:

Brief Report

Brief Report

HONDA ATLAS CARS (PAKISTAN) LIMITED

~1QFY15 Result Update Exceptional growth to start the year

1QCY15 Summary Upgraded margins controlled costs
Quarterly Profits

2000

Improved Top-Line and reduced COGS has significantly improved gross margins while
controlled operational costs resulted in enhanced operating margins. Further assistance
is provided by reduced financial charges.

1500
1000
500
0
-500

1QFY14

2QFY14

3QFY14

Gross Profit (PKR mn)

4QFY14

1QFY15

PAT (PKR mn)

Net sales clocked in at PKR 11.29bn, increasing by 3% YoY against sales of

PKR 10.9bn.

COGS have declined to PKR 9.86bn, down by 2% YoY against PKR 10.08bn
incurred in the same period last year.

Gross margins have improved to 12.7%, up by 509bps YoY. Resultantly gross

profit reaches PKR 1,430mn, up by 73% YoY.

Other income has increased to PKR 93.5mn, up by 12% YoY against PKR
82.8mn.

Finance costs have declined significantly by 82% YoY to reach PKR 2.5mn
against PKR 13.7mn.

Company Outlook
Market perception of new models appears positive and will likely maintain Top-Line in
coming terms. PKR is expected to remain stable and expected to keep COGS in check.
Performance is likely to be maintained in 2Q, however, 3Q sales could come under slight
strain from launch of new Corolla model by INDU. We are in process to determine the
target value of HCAR and we will come up with a detailed note later on after evaluating
the facts and figures with the managements point of view.

Sources: PSL Research, HCAR Financials, PAMA

July 28, 2014

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