The profitability of Pakistan’s auto sector is on the rise, with significant earnings growth expected for key industry players, Indus Motor Company (INDU) and Honda Atlas Cars (Pakistan) Ltd, driven by increased sales volumes and improved gross margins.
According to a statement by AKD Securities Limited, INDU is anticipated to report earnings of PkR4.7 billion for the second quarter of FY25, marking a 2.7 times year-on-year increase compared to PkR1.7 billion in the same period last year. This growth is attributed to a substantial increase in sales volumes, which rose 2.4 times year-on-year to 6,383 units, as well as the inclusion of Corolla Cross sales.
The statement further notes that INDU’s topline is expected to rise by 2.5 times year-on-year, with gross margins improving to 14.8% due to a decline in CRC/HRC prices. Operating expenses are projected to increase by 27% year-on-year due to higher volumes and increased advertisement costs associated with the Corolla Cross launch.
On the other hand, HCAR’s earnings for the third quarter of MY25 are expected to reach PkR498 million, a 3.5 times increase year-on-year from PkR143 million in the same period last year. This increase is driven by a 57% year-on-year rise in sales volumes, with the topline projected to grow by 50% year-on-year to PkR18.6 billion.
HCAR’s gross margins are anticipated to rise to 8.6%, supported by a decline in CRC/HRC prices and an increased share of Civic in the sales mix. However, other income is expected to decrease by 76% year-on-year due to the absence of short-term investments and a decline in customer advances.
The report maintains a ‘BUY’ recommendation for both INDU and HCAR, with target prices set for December 2025.