In Karachi, Atlas Honda Limited (ATLH), a prominent motorcycle manufacturer in Pakistan, is optimistic about its export prospects and anticipates generating nearly $25 million in export revenue during March FY24 (MY24), covering the period from April 1, 2023, to March 31, 2024.
During a recent corporate briefing, the company presented its financial performance for the preceding fiscal year, MY23, and shared its outlook for the future. Despite encountering economic challenges, ATLH achieved earnings of Rs40.33 per share in MY23, in contrast to Rs45.01 per share in the previous year. Nonetheless, ATLH declared an interim cash dividend of Rs24.0 per share for the year.
According to a report by Taurus Securities, ATLH managed to achieve sales revenue of approximately Rs135 billion, indicating a 3% year-on-year increase. However, the Profit After Tax (PAT) declined by 10% compared to the corresponding period last year, reaching approximately Rs5 billion.
Throughout MY23, the company experienced a decline in sales volume, in line with the industry-wide downturn of about 26% in the motorcycle and three-wheelers segment. Economic headwinds affecting purchasing power were primarily responsible for this decline, resulting in a 20% reduction in ATLH’s sales volume.
Despite these challenges, the company’s management remains optimistic about future sales volume projections. Their goal is to sustain sales volume above one million units in MY24, while the industry volumes are projected to range from 1.3 to 1.5 million units, as indicated by Auto analyst Muhammad Saad Imran from Ismail Iqbal Securities.
ATLH has secured an increased market share due to the exit of several Chinese players from the market. However, the overall reduced demand remains a concern for the company.
To ensure continued growth and explore new markets, automobile industry expert Mashood Ali Khan recommends that the company explores export opportunities in countries like Iran, Iraq, and Afghanistan for motorcycles. In a conversation with The Express Tribune, Khan acknowledges the challenges posed by banking inefficiencies in these regions, suggesting that transactions may occur through the barter system.
Over the year, the company has successfully enhanced its production capacity to 1.5 million units per annum. Additionally, it maintains a significant localization level, with 94.4% for CD70, 92% for CG125, and 84.3% for Pridor models.
ATLH has assured that it possesses sufficient raw materials for the upcoming quarters, offering some relief from the current challenges of importing raw materials faced by many industries. Around 70% of the major raw materials, including steel sheets, aluminum, zinc alloy, and nickel, are sourced locally, while materials for engine manufacturing are imported.
Despite concerns surrounding the potential of electric vehicle (EV) bikes in Pakistan, doubts have arisen regarding the feasibility and current limitations of the technology in terms of cost and global lithium supply. Currently, EV bikes in the country rely on lead-acid batteries, which have their limitations.
While the company looks forward to exploring new export markets, Sabir Shaikh, Chairman of the Association of Pakistan Motorcycle Assemblers (APMA), in an interview with The Express Tribune, raises concerns about the sustainability of export growth. He points out that consistency in the company’s operations remains uncertain, making it challenging to predict the continuation of this export surge.
The claims made by the motorcycle industry regarding localization are also questioned, particularly in light of recent government restrictions on imports. The resulting increase in motorcycle prices has raised doubts about the extent of true localization in the industry.
ATLH’s future performance will undoubtedly be influenced by the evolving economic landscape and industry dynamics. Nevertheless, the company remains hopeful about overcoming challenges and capitalizing on potential export markets to sustain growth in the upcoming fiscal year.
Published in The Express Tribune, July 20th, 2023.
