Honda Atlas Cars Pakistan (HCAR) announced impressive financial results for the third quarter of the fiscal year ending March 2025 (3QMY25), reporting a net profit of Rs. 566 million, translating to an earnings per share (EPS) of Rs3.97. This marks a 2.95x year-on-year (YoY) increase and a 2.2x quarter-on-quarter (QoQ) rise, significantly exceeding industry expectations.

The earnings surge was driven by higher gross margins of 9.2%, compared to 8.3% in 3QMY24 and 7.4% in 2QMY25, according to Topline Securities.

The company attributed this improvement to reduced inflationary pressures and operational efficiencies. Net sales for the quarter rose by 44% YoY and 8% QoQ to Rs17.8 billion, supported by an increase in unit sales to 3,736 vehicles, compared to 2,374 units in 3QMY24 and 3,348 units in 2QMY25.

Distribution expenses declined by 20% YoY and 19% QoQ to Rs147 million, while other operating expenses dropped sharply by 72% YoY and 74% QoQ to Rs17 million, further boosting profitability. Administrative expenses, however, increased by 15% YoY and 4% QoQ to Rs457 million. Other income fell by 34% YoY but rose 2.24x QoQ to Rs190 million, reflecting shorter delivery times for vehicles.

For the nine months ending March 2025 (9MMY25), HCAR reported earnings of Rs1.03 billion (EPS of Rs7.19), a 7% YoY increase compared to Rs964 million (EPS of Rs6.75) in 9MMY24. The effective tax rate for 3QMY25 stood at 43%, higher than 37% in 3QMY24 and 40% in 2QMY25.

HCAR is currently trading at a price-to-earnings (PE) ratio of 26.35x for MY25E and 14.38x for MY26F, with dividend yields of 2% and 3%, respectively.