Which factors will fuel HCAR’s 146% earnings rebound in 2026?

From a dip to a dramatic comeback

In Pakistan’s auto sector, few stories are as striking as that of Honda Atlas Cars (HCAR). After a year of declining profits and margin pressure, the company is poised to stage a sharp turnaround. Analysts expect earnings per share (EPS) to grow by 146% in FY26, rebounding from a 21% drop in FY25. What’s driving this rapid shift in fortunes? The answer lies in recovering volumes, stable market share, and a promising hybrid launch.

Sector overview: auto volumes to surpass 200,000 units

The broader auto industry is in recovery mode. Four-wheeler sales rose 42% YoY in FY25, with expectations of another 40% jump in FY26, potentially pushing annual volumes beyond 200,000 units. This growth is supported by lower interest rates, favorable financing options, and a pickup in economic activity. While concerns remain around government tariffs and regulatory shifts, industry leaders expect the impact to be minimal, especially on smaller vehicles. With the majority of HCAR’s sales coming from the 1.2L Honda City, the company is relatively insulated from policy shocks.

Company overview: HCAR gears up for a comeback

HCAR has faced its fair share of headwinds. In FY25, earnings dropped 21%, largely due to lower other income and fair value losses on financial assets. But underneath that, the business showed signs of strength: revenue jumped 42% and car sales grew 53%. The company’s market share held steady at 12%, and a favorable tax rate helped cushion the bottom line.

Now, HCAR is preparing for a strong rebound. With the Hybrid HR-V already pre-launched and monthly sales expected between 400–500 units, HCAR is tapping into growing consumer interest in fuel-efficient models. While the company absorbed the newly introduced NEV tax to stay price-competitive, it continues to benefit from high localization (52–74%), which helps manage costs better than newer entrants.

Financial snapshot

Why are analysts bullish?

Analysts see HCAR as a classic turnaround story. The company is set to more than double its profits in FY26, thanks to a powerful mix of growing demand, competitive pricing, and product innovation. With the Hybrid HR-V launch already gaining traction and industry volumes rising, HCAR is in a strong position to ride the next wave of growth. Its established brand, loyal customer base, and high localization give it a competitive edge, especially as incentives under the AIDEP 2021–26 policy expire, raising cost pressures for newer players.

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Risks to monitor

Despite the optimistic outlook, HCAR still faces several challenges. PKR depreciation could squeeze margins, especially for imported components. Stiff competition from Chinese and Korean brands is heating up, and while EV adoption is still a few years away, the government’s target of 30% EV penetration by 2030 could eventually shift the playing field. Additionally, as tax rates normalize and input costs rise, sustaining margins will require careful cost management.

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After a tough FY25, HCAR is set for a dramatic comeback in FY26, led by booming auto sales, strong hybrid demand, and margin improvements. With EPS expected to rise 146% and a promising dividend outlook, HCAR stands out as one of the most compelling growth stories in Pakistan’s auto sector today.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →