Staff Report:
Sazgar Engineering Works Limited (SAWEZ) is expected to announce its FY24 financial results on 23rd September, with the company anticipated to post a profit after tax (PAT) of Rs7.3 billion (Earnings Per Share, EPS, Rs121), compared to a PAT of Rs995 million (EPS Rs16) during the same period last year, reflecting a 7.3x year-on-year (YoY) increase. This rise in profitability is mainly driven by higher sales of Haval HEV SUVs and improved gross margins due to tax exemptions on HEV CKD imports.

On a quarterly basis, the PAT is expected to be Rs2.8 billion (EPS Rs47), compared to Rs3 billion (EPS Rs50) in the previous quarter, reflecting a 6% quarter-on-quarter (QoQ) decline.

Revenue to Triple in FY24

The company is expected to report net revenue of Rs57.6 billion for FY24, up 3x YoY from Rs18.2 billion last year. The surge in revenue is primarily driven by Haval HEV SUV sales, which rose 3x YoY to 5,374 units. Additionally, Sazgar’s rickshaw sales increased to 15,014 units, up 60% YoY, while auto parts sales grew to 69,500 units, up 1.9x YoY.

For the fourth quarter (4QFY24), net revenue is projected at Rs22.9 billion, up 15% QoQ, mainly due to a rise in SUV sales, which reached 2,183 units, up 16% QoQ. Ex-factory vehicle prices are expected to remain stable at Rs9.5 million during 4QFY24.

Other income for FY24 is anticipated to be Rs1.2 billion, primarily driven by high-interest income due to elevated interest rates.

Gross Margins to Remain Strong

Analysts of Sherman Research said that the company is expected to post gross margins of around 24% for FY24, up from 14% last year, driven by higher margins on HEV SUV sales. For 4QFY24, gross margins are expected to be around 22%, a slight increase from 20% in 3QFY23 but down from 29% in 3QFY24. This decline is attributed to a drop in SUV margins to 23%, along with increased raw material costs.

The company is expected to announce a dividend per share (DPS) of Rs15 for 4QFY24, bringing the cumulative DPS for FY24 to Rs23.