In June last year i.e. 2017 Rs.2.08 billion was reported in profit by Honda Atlas Cars Pakistan (HCAR) but this year the profits were down by record 50% i.e. Rs.1.05 billion for the quarter that ended on 30 June 2018.
Last year the earning per shares (EPS) were Rs.14.61 but it has decreased to Rs.7.39 in Apr-June 2018. For the first quarter, no dividend was announced.
City and Civic witnessed growth in sales with the demand for BR-V was declined by 19% YoY. Gross margins decreased by 28.43% to Rs.2.14 billion. Last year it was Rs.2.99 billion.
Although the volume growth has increased by 13.02 % year on year basis less profit can be attributed to the devaluation of Rupee, increase in the prices of steel and increase in the effective tax rate of 44% compared to 28% last year.
The recent increase of 100 basis points in interest rate by the State Bank may also have a slight impact on car sales in the future. It will create further weakness as Pakistan looks to cut consumption and curtail its current account deficit.
In addition to Rupee depreciation and rising rate, regulatory changes – barring non-tax filers from purchasing new cars – have added additional uncertainty to the investment case for Pakistan’s auto sector.