Sazgar Engineering Works Limited: Highlights from the Corporate Briefing

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Sazgar Engineering Works Limited recently held a corporate briefing to share their latest updates and future plans. In this blog, we will cover the notable financial achievements, thrilling product innovations, tactical benefits, market understanding, growth and investment initiatives

Impressive Financial Performance

Record Profits: Sazgar reported a profit of PkR3.03 billion, with earnings per share (EPS) of PkR50.2. This is a massive increase, tripling compared to the last quarter and growing nearly six times compared to the previous year.

Revenue Growth: The company’s revenue reached PkR7.9 billion, more than double the previous quarter and 1.54 times increase from last year.

Improved Margins: The gross margin improved significantly, rising to 25.82% in March 2024 from 14.03% in June 2023.

Exciting Product Developments

New Hybrid Cars: Sazgar is now offering two hybrid cars, the Jolion HEV and H6 HEV, aimed at different market segments to avoid competition between their own models. The pre-booking for HAVAL Jolion HEV, locally manufactured, has been successful, with the first batch to be delivered in June 2024. Hybrid models make up 70%-90% of sales so far.

SUV Production: Currently, the SUV production capacity utilization is at 15%, but the management plans to increase this to 35%-40% this year due to rising demand.

Strategic Advantages and Market Insights

Healthy Margins: Sazgar enjoys healthy margins, partly because of the strong performance in their 3-wheeler segment. Additionally, competitors are selling at lower margins as their models reach the end of their life cycles and they aim to clear inventory.

Growing 3-Wheeler Market: The 3-wheeler market, especially the cargo segment, is growing rapidly. Sazgar expects this trend to continue into FY25. The company has over 50 dealers for 3-wheelers and 16 for four-wheelers, with potential for more based on demand.

Investment and Expansion

Significant Investments: Sazgar has increased its investment in capital expenditure (capex), raising its Property, Plant, and Equipment to PkR4.3 billion in March 2024 from PkR2.8 billion in March 2023.

Focus on EVs: The management sees potential in the EV rickshaw segment but highlights challenges due to expensive imported batteries. They believe that if a solution for swappable batteries is found, this segment could see steady growth.

Production and Market Strategy

Boosting Production: To meet demand, Sazgar has improved production efficiency, reducing the waiting time for Haval vehicles from 4-6 months to 2-3 months.

Avoiding Low-Margin Segments: The company does not plan to enter the A-segment (vehicles below PkR5 million) dominated by PSMC, as it is highly price-sensitive with low margins.

Localization Efforts: Sazgar adheres to the Auto Industry Development and Export Policy (AIDEP) 2021-2026 by carefully selecting its vendors to meet localization requirements.

Future Focus and Market Expansion

Staying in the Auto Industry: Sazgar plans to stay focused on the automotive industry, particularly in eco-friendly cars, expanding their dealership network, and exploring new export markets like Egypt and Thailand.

Pricing Influences: Future car prices will depend on changes in the budget and improvements in the Pakistani Rupee (PkR) parity.

Key Stock Price Matrix

Trading Metrics: Sazgar’s stock is currently trading at a price-to-earnings (P/E) ratio of 8.63 and a price-to-book (P/B) ratio of 5.98.

In summary, Sazgar Engineering Works Limited is making significant strides in the automotive industry with impressive financial performance, innovative product offerings, strategic investments, and a clear focus on market expansion and efficiency improvements.

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