Sazgar Posts Impressive 1,689% Profit Growth in Q3 2023

Sazgar Engineering Works Limited (PSX: SAZEW) announced its financial results for the quarter that ended on March 31st, 2023 (3QFY23), wherein the company’s profits after tax (PAT) increased by 1,689 percent year-on-year (YoY) or 16.8x to Rs. 444.6 million from Rs. 24.84 million recorded in the same period last year. Meanwhile, SAZEW increased its nine-month earnings in July-March (9MFY23), ending the period with a profit after tax of Rs. 523.7 million, up 343.8 percent YoY from Rs. 117.9 million in 9MFY22. During the quarter, the net sales of the company increased by 176.3 percent YoY to Rs. 7.9 billion from Rs. 2.85 billion. During 9MFY23, the topline showed a 78 percent surge where sales increased from Rs. 7.07 billion to Rs. 12.59 billion. According to a stock filing, SAZEW sold 3,993 three-wheelers and 864 four-wheelers during Q3. Cumulatively, the company produced 3,066 and sold 4,857 units in the two flagship categories during 3QFY23. The gross profit of the company in 3QFY23 jumped by 393.4 percent YoY to Rs. 870 million, translating into gross margins of 11 percent for the period in review. Meanwhile, the other income increased by 204.5 percent from Rs. 4.54 million to Rs. 13.83 million during the quarter. Other income during 9MFY23 went up by 74.8 percent YoY to Rs. 17.6 million. SAZEW’s finance cost skyrocketed by a massive 319 percent from Rs. 31.8 million to Rs. 133.2 million in 9MFY23 and 202 percent during Q3. The company reported earnings of Rs. 7.36 per share in Q3 as opposed to Rs. 0.41 per share in the previous year. The company has not announced a cash dividend for the quarter. At the time of filing, the company’s scrip at the bourse was Rs. 50.39, up 7.40 percent or Rs. 3.47 with a turnover of 1.06 million shares on Tuesday. Unlike many automakers, Sazgar had a strong start this year in terms of sales. The company sold 416 Haval H6 units in January 2023, 280 units in February, and 100 units in March. The launch of Haval H6 HEV has likely aided in the impressive sales. Although, the sales of BAIC BJ40 have not gone so well. Additionally, Sazgar increased the prices of its vehicles by up to Rs. 2.4 million in Q1 2023. As a result, H6 now costs from Rs. 9.5 million to Rs. 12.15 million, becoming even more of a niche product. Given these developments, only time will tell if the company can continue to ride the tide of success.