Sazgar Engineering Expected Earnings 84% Up in 3QFY25
Staff Report
Topline Research expects Sazgar Engineering (SAZEW) to post earnings of Rs92.13/share during 3QFY25, reflecting a 131% increase QoQ and 84% YoY. Alongside this, we also anticipate the company will declare a dividend of Rs15-18/share, based on the average payout ratio of 20% in the last two quarters.
The company is expected to report robust profitability, with 4-wheeler sales projected to reach 3,686 units, marking a 95% increase YoY and 112% increase QoQ during the outgoing quarter (3QFY25).
The higher 4-wheeler sales are attributed to record sales in January 2025, as consumers prefer deliveries with the new year’s registration in Pakistan. We have assumed sales of 1,860 units in January 2025. To recall, the company reported combined sales figures for December 2024 and January 2025 at 2,010 units.Corporate Profits in 2024: Earnings Dip, Dividends Surge
We expect the company to maintain its gross margins at 28.9% during 3QFY25, due to relatively stable currency and stable sales prices in the 4-wheeler segment. The company has reported average gross margins of 28.85% in the last four quarters,” Topline Research said.
We anticipate distribution costs to increase by 35% QoQ and 119% YoY to Rs1bn, driven by higher volumetric sales. Admin expenses are projected to rise 18% QoQ and 50% YoY to Rs159mn, while other expenses may surge 122% QoQ and 92% YoY to Rs713mn, in line with rising profitability.
Other income is expected to increase to Rs398mn, up 141% YoY and 20% QoQ, driven by an increase in cash balance.
On a full-year basis, for FY25, we expect the company to post earnings of Rs261.2/share (dividend: Rs50/share), reflecting a 99% increase YoY, based on the assumption of 10,527 units in 4-wheeler sales (2,500 units in 4QFY25). In FY26, we estimate earnings of Rs319/share (dividend: Rs62/share), based on the assumption of 11,053 units in 4-wheeler segment sales (approximately 921 units per month).
We maintain our BUY call on SAZEW, as the company is currently trading at a FY25/26 PE of 4.2x/3.4x, compared to the industry forward PE of 8.6x/7.0x.
Reportedly, the Haval H6 GT PHEV is set to debut globally in October, with a local launch expected by year-end, which is likely to boost SAZEW’s sales and positively impact the company.
