1 Honda Atlas Cars Pakistan Limited Prepared by The evaluation of business and the financial performance over three years periodHonda Atlas Cars Pakistan LimitedPrepared by
2 Contents Reasons for Selection Project Objectives Research Questions Research ApproachTrend AnalysisRatio AnalysisSWOT AnalysisPESTEL AnalysisLimitations of the Methodologies usedInformation Gathering
3 Reasons for Selection Reasons for topic selection Helpful in utilizing my knowledge, reaffirming my concepts and providing a competitive advantage for CFA enrollment.Interest in understanding what different numbers show us in different frames of financial statements.Interesting and full of informationPersonal interest in understanding the standing of an organization in market and its strategies for attracting potential investors.Reasons for automobile industry selectionAvailability of timely, relevant and reliable information.Important role in the GDP of the country.Actively following this sector in stock market for my investment portfolio.
4 Project ObjectivesTo analyze Profitability, liquidity, Long term solvency and capital structure, Financial risk ,Analysis with respect to an investor.To evaluate the financial position of the company and assess its position in the industry.To identify the opportunities and potential threats that can effect the entity and how the entity can use its strengths to avail the opportunities or avoid threats.Assess the strategic position, factors affecting it major market, and the overall industrial factors
5 Research QuestionsEffect the economic, competitive, political and national environment in the country.The strength and Weakness of Honda Atlas Cars (Pakistan) Limited.Reasons for reported profitability performance of Company.Evaluation of the critical success factors.
6 Research Approach Trend analysis Ratio analysis SWOT analysis An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future.Ratio analysisAssessing ProfitabilityCoverage’s of the companyLiquidity position and Operating structureInvestment ratiosSWOT analysisCombines the result of the environmental analysis and the internal appraisal into one framework for assessing the firm’s current and future strategic fit, or lack of it, with the environment. It is an analysis of the organization’s strength and weaknesses, and the opportunities and threats offered by the environment.PESTEL analysisIt identifies the Political, Economic, Social, Technological, Environmental and Legal factors in environment and their impact on the whole economy, on a particular industry and on a particular organization.
9 SWOT Analysis Weaknesses: Strengths: The factory of Honda is located away from sea ports due to which company has to bear higher transportation charges.Lack of presence in the lower end market (below 1300cc).Company is depending heavily on Long term debt resulting increased interest charges and decreased shareholders confidence coupled with continuous non payment of dividends in past years. Poor management of resources has resulted in decreased profits.Spare parts of Honda atlas cars are expensive.Strengths:HACPL is Pakistan’s third-largest car producerHonda is ISO 9001 (Quality Management System) and ISO EMS (Environment Management System) compliant organization.The company has a wider dealership network all over Pakistan.Honda atlas retains 29% of overall market share in FY09.Company has the pride of providing most environment friendly Euro III compliant City and Euro IV compliant Civic cars to its customers.Honda atlas introduced the 3rd Generation Honda City on January 31, It has V-tech Engine, Anti Lock Braking System (ABS) and Euro-4 emission systems, which are considered to be the strictest emission standard worldwide.
10 SWOT Analysis - Continued Opportunity:Many locally made cars in below 1300cc such as Suzuki models and Toyota’s, etc are globally obsolete cars from the 1970s or 1980s which are no longer produced or sold in any country other than Pakistan.Honda atlas does not cover the whole market and currently focus on the high end customers. It can break through in low range vehicles (below 1300cc) and can gain grounds.It could be hard for new entrants to gain a foothold in a slowing market; particularly as rising inflation will need to be curbed by monetary policies.Government’s recent enforcements of withholding taxes and increased Import duties presents favorable picture for future local market of which provides HACPL a forum to prove themselves and come over their competitors.Threats:Movement in the steel prices in the future period may adversely affects the production cost and profit as it has over the past years.The rising oil prices have adversely affected the sale demand.Rising inflation and interest cost thus affecting the mark-up in car leasing had reduced financing option for consumers.Pak-Suzuki is a dominant force in the auto industry in Pakistan, along with other manufacturers such as Indus Motors and Hyundai; Honda Atlas is facing strong competitive forces in the industrial field
12 Limitations of the Methodologies used Limitations of Trend AnalysisBased on EstimatesCompanies have a choice of accounting methodsLimitations of Ratio analysisA ratio is static in nature and does not reveal future flows.A ratio does not reveal the amount of its components.A ratio does not reveal the quality of its components.A ratio is based on historical cost not taking into account inflation. Limitations of SWOT AnalysisNo grey area - SWOT is basically a chart of showing 4 parts. It is effective only if the analysis is clear cut.Too subjective - the classification of some factors as strengths or weaknesses, or as opportunities or threats is somewhat arbitrary.
13 Information Gathering SourceslimitationsPrimary SourcesAdmin executiveSecondary SourcesAnnual audited financial statementsBooks and different write-up.Lahore Stock exchange and Chamber of commerce.InternetPrimary SourcesConfidentialitySecondary SourcesLess reliable and accurate.May b e biased.May not fulfill the purpose for which it has been obtained.