SAZEW stands out in the auto sector based on expected earnings growth?
Shifting gears: auto sector rebounds
After a tough period marked by high interest rates and slowing demand, Pakistan’s auto industry is finally turning a corner. Sales volumes have surged, financing has become more attractive, and new model launches are pulling customers back into showrooms. With monetary easing now underway, the sector is well-positioned for a recovery. In this promising landscape, Sazgar Engineering Works (SAZEW) has emerged as the top stock in the auto sector based on expected earnings growth.
Sector overview: sales rebound and margin recovery
The auto sector is expected to post a 33% year-on-year jump in profits for 4QFY25, reaching PKR 13 billion. This strong performance is being powered by a 60% surge in sales volumes, driven by improving economic activity and the return of consumer confidence. For the full year FY25, industry profits are projected to grow by 77%, as automakers benefit from cost efficiencies, favorable financing terms, and steady price hikes. Sector-wide gross margins are estimated to improve to 17.5%, up from 14.7% last year, showing that the profit recovery is not just about volume but also better cost management.
Company overview: SAZEW rides high on hybrid momentum
Among the major automakers, SAZEW stands out with an estimated earnings per share (EPS) of PKR 72.6 in 4QFY25, up 14% year-on-year. Despite a quarter-on-quarter dip in profits due to a temporary decline in Haval hybrid SUV sales, SAZEW remains one of the strongest players in the market. The company is expected to announce a final dividend of PKR 11 per share, bringing its total FY25 payout to PKR 43 per share, a sign of both profitability and shareholder confidence.
For the quarter, revenue is forecasted at PKR 27.6 billion, up nearly 20% year-on-year. Though sales slowed slightly from the previous quarter due to road blockages and increased competition, SAZEW’s gross margins are still expected to remain strong at 29.1% for 4QFY25 and an impressive 30.1% for the full year.
Financial snapshot
| Metric | 4QFY25E | 4QFY24 | QoQ Change | FY25E | FY24 | YoY Change |
|---|---|---|---|---|---|---|
| EPS (PKR) | 72.6 | 63.8 | -29.6% | — | — | — |
| Dividend (PKR/sh) | 11.0 | — | — | 43.0 | — | — |
| Net Sales (PKR mn) | 27,600 | 23,100 | -25.0% | 129,346 | 93,277 | +39% |
| Gross Margins (%) | 29.1% | — | — | 30.1% | — | — |
| Net Profit (PKR mn) | 12,966 | 9,725 | -11% | 44,882 | 25,400 | +77% |
| Analyst Stance | Positive | — | — | — | — | — |
Why are analysts bullish on SAZEW?
Analysts are confident in SAZEW’s ability to maintain strong earnings, even as competition increases. The company has carved out a niche with its Haval hybrid lineup, which has been leading the crossover segment in Pakistan. Despite a temporary sales slowdown this quarter, SAZEW’s margins remain healthy, and its earnings momentum is intact. With monetary easing continuing and auto financing becoming more accessible, the company is well-positioned to grow further in FY26. Its high dividend payout and strong profitability signal a solid return profile for investors.
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Risks to watch
While SAZEW is showing strong earnings growth, several risks could affect its outlook. A weakening PKR may put pressure on margins, especially for imported components. Rising competition in the hybrid and EV segments could also challenge its market share, particularly if global brands enter more aggressively. Additionally, recent transportation disruptions, such as road blockages in parts of Sindh, have already impacted volumes this quarter. Finally, a shift in government policies toward electric vehicles, including new incentives and toll tax exemptions for EVs, could speed up the transition away from internal combustion engine (ICE) vehicles, potentially disrupting traditional players like SAZEW.
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With robust earnings growth, strong margins, and a generous dividend, SAZEW stands out as the top stock in the auto sector for FY25. Even as the industry evolves and competition heats up, SAZEW’s hybrid-focused strategy and consistent financial performance make it a clear front-runner.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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