Pakistan Auto Sector Earnings Expected to Rise 1% 1st quarter
Pakistan’s auto sector is expected to report a marginal increase in earnings during the first quarter of 2026-27. The sector supported by higher year-on-year vehicle sales, while lower quarterly volumes and pressure on gross margins are likely to weigh on profitability.
According to a report by Topline Securities, aggregate earnings of its auto sector coverage universe are projected to reach Rs12.6 billion in 1QFY27, compared with Rs12.5 billion compared to the last year. It reflected a 1% year-on-year increase. However, earnings are expected to decline 35% quarter-on-quarter.
Net sales are forecast to increase 39% year-on-year to Rs179 billion, although they are expected to fall 10% sequentially. The quarterly decline is attributed to lower vehicle sales amid uncertainty surrounding the auto policy and delayed clarity over general sales tax (GST) on hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs).
Auto Sales Volumes Increase 30% Year-on-Year
Vehicle sales reached 26,688 units in first quarter 2026-27, up 30% from a year earlier but down 16% compared with the previous quarter.
Honda Atlas Cars and Indus Motor Company led the annual growth, recording increases of 52% and 34% in sales volumes, respectively. On a quarterly basis, sales declined across most companies, while Indus Motor was the only company in the coverage universe to record growth, with volumes rising 17%.
Topline Securities expects average gross margins to decline to 16.4% in 1QFY27, compared with 19.5% in 1QFY26 and 16.7% in 4QFY26. The contraction is primarily attributed to Sazgar Engineering Works, which is absorbing the higher sales tax on HEV and PHEV variants.
Other income across the auto sector is projected to decline 33% quarter-on-quarter to Rs5.3 billion, mainly because of the absence of one-off gains from the SIDC settlement recorded in the previous quarter. The effective tax rate is also expected to rise to approximately 37%, compared with 35.5% a year earlier and 34.8% in the preceding quarter.
Indus Motor Earnings Expected to Increase
Indus Motor Company (INDU) is expected to post earnings per share (EPS) of Rs87.6 in 1QFY27, up 2% year-on-year and 13% quarter-on-quarter.
The projected growth is supported by higher sales volumes of 13,261 units, compared with 9,889 units in 1QFY26 and 11,333 units in 4QFY26.
The company’s gross margins are expected to improve to 13% from 10.3% in the previous quarter, reflecting a normalization following one-off adjustments. Indus Motor to announce a cash dividend of Rs53 per share, representing a payout ratio of 60%.
Honda Atlas Cars Faces Sequential Earnings Decline
Honda Atlas Cars (HCAR) is expected to report EPS of Rs5.8 in 2QMY27, up 11% year-on-year but down 67% quarter-on-quarter.
The expected decline is mainly due to lower other income following the absence of accounting gains from the SIDC settlement, alongside a normalized effective tax rate.
The company sold 7,401 units during the quarter, reflecting a 52% year-on-year increase and a 7% sequential decline. Its gross margins are expected to remain stable at approximately 7.7%.
Analyst does not expect Honda Atlas Cars to announce a cash dividend, in line with the company’s historical practice of paying dividends at the end of the financial year.
Sazgar Engineering Earnings Under Pressure
Sazgar Engineering Works (SAZEW) is projected to report earnings of Rs63.3 per share, down 13% year-on-year and 56% quarter-on-quarter.
The decline is expected to reflect lower sales volumes and shrinking gross margins as the company absorbs higher sales taxes. The expiry of concessionary duties on imported parts in June 2026 is also expected to weigh on profitability.
Sazgar sold 3,137 units in 1QFY27, down 12% year-on-year and 52% quarter-on-quarter. Sales of the Tank 500 are estimated at 1,065 units during the period, while gross margins are projected to decline to 13%.
The brokerage expects Sazgar Engineering to announce a cash dividend of Rs10 per share alongside its results.
Millat Tractors Earnings Rise on Annual Basis
Millat Tractors Limited (MTL) is expected to report EPS of Rs2.8 in 1QFY27, representing a 79% year-on-year increase but a 45% quarter-on-quarter decline.
The annual improvement is attributed to higher sales volumes, better gross margins, cost optimization and the amalgamation of Millat Equipment Limited into Millat Tractors.
However, an approximately 50% sequential decline in sales volumes is expected to weigh on revenue and profitability compared with the previous quarter.
Atlas Honda Maintains Strong Two-Wheeler Market Position
Atlas Honda Limited (ATLH), brokerage house’ preferred stock in the auto sector, is expected to post EPS of Rs48.5 in 2QMY27, up 25% year-on-year and broadly unchanged quarter-on-quarter.
The company continues to record strong motorcycle sales, with quarterly volumes reaching an all-time high of 470,399 units, up 28% year-on-year and 1% quarter-on-quarter.
Atlas Honda maintains a dominant position in Pakistan’s two-wheeler market, with an estimated market share of approximately 85%. The company to announce a half-year cash dividend of Rs55 per share alongside its results.
Overall, the brokerage’s outlook suggests that Pakistan’s auto sector continues to benefit from annual sales growth, although quarterly volume declines, tax-related uncertainty and margin pressures are expected to limit earnings momentum in the first quarter of FY27.
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