Topline Auto Universe earnings are projected at Rs12.6 billion as quarterly vehicle sales volumes decline 16%, while higher taxes and lower other income weigh on profitability.
KARACHI: Pakistan’s automobile sector is expected to report a 35% quarter-on-quarter (QoQ) decline in profitability in the first quarter of fiscal year 2026-27 (1QFY27), primarily due to a 16% drop in sales volumes, according to a report by Topline Securities Limited.
The Topline Auto Universe is projected to post combined earnings of Rs12.6 billion in 1QFY27, compared with Rs12.5 billion in the corresponding period last year, reflecting year-on-year (YoY) growth of 1%.
Net sales are expected to increase 39% YoY but decline 10% QoQ to Rs179 billion. The sequential decline is attributed to lower sales volumes amid uncertainty surrounding the automobile policy and delayed clarity over general sales tax (GST) on hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs).
Vehicle sales across the brokerage’s coverage universe stood at 26,688 units during the quarter, up 30% YoY but down 16% QoQ.
Honda Atlas Cars (HCAR) and Indus Motor Company (INDU) supported the annual increase, recording sales volume growth of 52% and 34%, respectively. On a quarterly basis, however, volumes declined across the coverage universe, with INDU being the only company to record growth, posting a 17% increase.
Topline Securities expects average gross margins to decline to 16.4% in 1QFY27 from 19.5% in 1QFY26 and 16.7% in the preceding quarter. The contraction is primarily attributed to Sazgar Engineering Works (SAZEW), which is absorbing the increase in GST on HEV and PHEV variants.
Other income across the Topline Auto Universe is projected to fall 33% QoQ to Rs5.3 billion, following the absence of one-off gains from the SIDC settlement recorded in the previous quarter. Meanwhile, the effective tax rate is expected to rise to approximately 37%, compared with 35.5% a year earlier and 34.8% in 4QFY26.
Indus Motor, Honda Atlas and Sazgar earnings outlook
Indus Motor Company (INDU) is expected to record earnings of Rs87.6 per share in 1QFY27, up 2% YoY and 13% QoQ. The improvement is attributed to higher sales volumes, which increased to 13,261 units from 9,889 units in 1QFY26 and 11,333 units in 4QFY26.
The company’s gross margins are projected to recover to 13% from 10.3% in the preceding quarter, following the normalisation of margins after one-off adjustments. Topline Securities expects INDU to announce a cash dividend of Rs53 per share, representing a payout ratio of 60%.
Honda Atlas Cars (HCAR) is expected to report earnings per share (EPS) of Rs5.8 in 2QMY27, up 11% YoY but down 67% QoQ. Lower other income following the absence of accounting gains from the SIDC settlement, alongside a normalised effective tax rate, is expected to weigh on profitability.
The company’s sales volumes increased 52% YoY but declined 7% QoQ to 7,401 units. Gross margins are projected to remain stable at approximately 7.7%. No cash dividend is expected, in line with the company’s historical practice of announcing dividends at the end of its financial year.
Sazgar Engineering Works (SAZEW) is projected to report earnings of Rs63.3 per share, down 13% YoY and 56% QoQ. Lower sales, declining gross margins, higher sales tax and the expiry of concessionary duties on imported parts in June 2026 are expected to weigh on results.
SAZEW sold 3,137 units in 1QFY27, down 12% YoY and 52% QoQ. Tank 500 sales are estimated at 1,065 units, while gross margins are projected to decline to 13%. The brokerage expects the company to announce a cash dividend of Rs10 per share alongside its results.
Millat Tractors and Atlas Honda outlook
Millat Tractors Limited (MTL) is expected to post earnings of Rs2.8 per share, up 79% YoY but down 45% QoQ. The annual increase reflects higher volumes, improved gross margins following the amalgamation of Millat Equipment into MTL, and cost optimisation.
However, an approximately 50% quarterly decline in sales volumes is expected to put pressure on revenue and contribute to the sequential fall in earnings.
Atlas Honda Limited (ATLH), identified by Topline Securities as one of its preferred stocks, is projected to report EPS of Rs48.5 in 2QMY27, up 25% YoY and flat QoQ.
The company continues to record record-high quarterly sales volumes and maintains its dominance in Pakistan’s two-wheeler market, with an estimated market share of approximately 85%. Topline Securities expects Atlas Honda to announce a half-year cash dividend of Rs55 per share.
Atlas Honda’s sales reached 470,399 units in 2QMY27, representing growth of 28% YoY and 1% QoQ.
Overall, the outlook points to mixed performance across Pakistan’s automobile sector in the coming results season. Although annual earnings are expected to remain broadly stable, lower quarterly volumes, pressure on margins, higher tax costs and reduced other income are likely to weigh on profitability in 1QFY27.