Ayesha Mudassar

Sazgar Engineering Works Limited’s (SAZEW) profit-after-tax soared by a remarkable 582% to Rs3.03 billion in the first quarter of the ongoing calendar year (1QCY24) from Rs444.6 million over the same period last year, according to WealthPK.  The earnings during the period were greatly supported by the company’s other income, which stood at Rs164.7 million in 1QCY24 compared to paltry Rs13.8 million in 1QCY23.

The company’s turnover surged by 150% year-on-year (YoY) to Rs20.05 billion from Rs8.01 billion in 1QCY23.According to Pakistan Automotive Manufacturers Association, all three segments (four-wheeler, three-wheeler, and tractor-wheel rims) witnessed substantial growth during the quarter. Likewise, the cost of sales grew by 103% YoY. However, the growth in sales outpaced the rise in cost, leading to a significant 492% YoY improvement in gross profit, which reached Rs5.8 billion in 1QCY24.

Large-cap automobile assemblers -- 1QCY23 vs 1QCY24

The net sales of large-cap automobile assemblers grew by 25%, gross profit by 92%, and net profit by 178% during 1QCY24 compared to the corresponding quarter of last calendar year. Large-cap automobile assemblers include Indus Motor Company Limited, Millat Tractors Limited, Atlas Honda Limited, Sazgar Engineering Works Limited, and Honda Atlas Cars (Pakistan) Limited. The automobile assemblers posted net sales of Rs161 billion and gross profit of Rs24.9 billion in 1QCY24. The net profit stood at Rs15.09 billion against Rs5.43 billion in the same period last year, resulting in earnings per share (EPS) of Rs159.26 versus Rs59.79 in 1QCY23. The robust performance was due to a better sales mix, efficient treasury operations, and prudent management of enhanced liquidity.

In addition, the gross and net margins settled at 15% and 9%, respectively, in 1QCY24. Higher margins portray the prudent management of expenses.Operating expenses encompassing administrative, selling and distribution, and other costs declined marginally from Rs9.06 billion to Rs8.3 billion during the quarter under review.Furthermore, the assemblers’ finance cost dipped by 98% YoY to Rs940.6 million from Rs42.8 billion in 1QCY23.On the tax front, the sector paid a significantly higher tax worth Rs7.7 billion against Rs3.3 billion in the corresponding period of last year, depicting a rise of 128% YoY.

Company description

Sazgar Engineering Works (PSX: SAZEW) was incorporated in Pakistan as a private limited company in 1991 and was converted into a public limited company in 1994. The principal activity of the company is the manufacturing and sale of automobiles, automotive parts and accessories, and household electronic appliances.

Future outlook

The positive momentum in macroeconomics signals promising growth prospects and improved business sentiments. The establishment of the Special Investment Facilitation Council, and the government’s engagement with the International Monetary Fund to conclude a long-term loan facility will surely attract greater investment, ensure stability, and foster growth.

Credit: INP-WealthPk