Honda Atlas Cars (Pakistan) Limited (HCAR) is scheduled to hold its board meeting on Apr14’ 15 for unveiling financial results. We preview the company to post earnings of PKR1,164mn (PKR8.14/sh) in 4QMY15 as compared to PKR632mn (PKR4.43/sh) in 4QMY14, up 84%YoY. The growth in the earnings can be attributed to i) 15%YoY increase in volumes, ii) 8.9pps expansion in margins and iii) expected decrease in effective tax rate by 8pps to 33%. On a QoQ basis earnings are expected to show an astounding jump of 3.25x primarily on the back of 2.12x higher volumes. On a cumulative full year MY15 basis, earnings are expected to clock in at PKR2,739mn (PKR19.18/sh) as against PKR1,073mn (PKR7.52/sh) in MY14, representing a growth of 2.55xYoY. The result is also expected to accompany a final cash dividend of PKR7.5/sh for the year ended Mar’15. At our target price of PKR260/sh, we currently have an ‘ACCUMULATE’ stance on the scrip, which offers a total return of 7% from last close.

High volumes lifting earnings northwards: HCAR was able to post substantial growth in volumes in 4QMY15 wherein volumes clocked in at 7,827 units, enabling the company to register a growth of 2.12xQoQ/15%YoY. Higher volumes are also expected to assist in lowering overhead cost per unit and therefore augmenting gross margins.