Auto demand rebounds, earnings on the fast lane

January 26, 2026 (MLN): Auto Sector companies including Indus Motor (INDU), Honda Atlas Cars (HCAR), Sazgar Engineering Works (SAZEW) and Millat Tractors (MTL) are set to report strong profitability in 2QFY26, with aggregate earnings projected at Rs14.7 billion, up 35% YoY from Rs10.9bn in 2QFY25.

On a quarterly basis, profits are also expected to rise 19%, supported by improving economic activity, the introduction of new variants, and lower interest rates,.

According to an earning preview by Topline Securities, net sales are forecast at Rs161.5bn, up 63% YoY and 26% QoQ, driven by higher volumes and a relatively stable Pak Rupee.

Total vehicle volumes rose 45% YoY and 36% QoQ to 27,821 units, while passenger car sales for Indus Motor, Honda Atlas Cars, and Sazgar Engineering climbed 84% YoY and 17% QoQ to 21,486 units, signaling a strong recovery in car demand.

Gross margins are expected to compress slightly to 18.63%, from 19.27% in 1QFY26, due to product mix shifts, higher sales of lower-margin variants, and cost pressures such as the carbon levy.

Despite the typical December effect when buyers often delay purchases for January registration car sales still increased 39% YoY, indicating pent-up demand likely to accelerate in the next quarter.

Company-wise, INDU is expected to post EPS of Rs81.97, up 32% YoY but down 4% QoQ. Honda Atlas Cars HCAR may report EPS of Rs9.83, up 2.5x YoY and 89% QoQ, while SAZEW is projected at Rs76.31, up 92% YoY, with a dividend of Rs15/share.

MTL is expected to see EPS decline 26% YoY to Rs11.21, though up 4.3x QoQ, with volumes gradually recovering.

Currently, Atlas Honda (ATLH) continues to dominate the 2-wheeler segment, posting EPS of Rs43.48, up 34% YoY and 12% QoQ, supported by record quarterly sales of 423,651 units.

The sector’s growth outlook remains positive, with new variant launches, easing interest rates, and higher auto financing penetration expected to sustain demand in the coming quarters.

Source: Topline Securities

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