Karachi: Sazgar Engineering Works (SAZEW) has reported a 9% year-on-year decline in earnings per share, amounting to Rs66.77 for the first quarter of fiscal year 2027, with a total profit of Rs4.0 billion. Despite the decrease, the company's performance surpassed industry expectations, primarily due to higher-than-anticipated gross margins.
According to JS Global, the company's net sales increased by 23% year-on-year to Rs42 billion, although it experienced a 45% decline quarter-on-quarter. The year-on-year growth was attributed to the introduction of the Tank 500, while the quarterly decline was linked to reduced sales volumes. Four-wheeler sales volumes were recorded at 3,137 units, marking a 12% year-on-year and 50% quarter-on-quarter drop. However, three-wheeler sales rose by 45% year-on-year and 4% quarter-on-quarter, reaching 7,735 units.
Gross profit margins for the quarter stood at 20%, a decline from 25% in the same period last year. The reduction in margins is likely due to the impact of higher GST on hybrid and plug-in hybrid vehicles, a cost partially absorbed by the company. Despite the expiration of concessionary tariffs on raw materials, margins remained higher than forecasted, aided by inventory holdings of approximately Rs42 billion as of June 2026.
The company's distribution expenses increased by 72% year-on-year, reaching Rs1.7 billion, while administrative expenses rose by 6% year-on-year but fell 6% quarter-on-quarter. Other expenses decreased by 10% year-on-year and 54% quarter-on-quarter. Other income experienced a 22% year-on-year increase, despite a 6% quarter-on-quarter decline, totaling Rs629 million. A significant rise in finance costs was noted, attributed to increased long-term borrowings.
The effective tax rate for the period was 37%, slightly lower than the previous year's 39%, reflecting a reduction in the super tax by 200 basis points as outlined in the FY27 budget. Alongside the financial results, SAZEW declared an interim cash dividend of Rs5 per share, translating into a payout ratio of 7%, compared to 21% in the first quarter of FY26. Despite the challenges, JS Global maintains a 'BUY' rating on the company's stock.