Sazgar Engineering’s (SAZEW) FY25 plans look promising

The SUV auto Industry and its major player in Pakistan Sazgar Engineering Works Limited (SAZEW) started transferring the Great Wall Motors (GWM) Haval model to Pakistan in August 2022. The competition in the hybrid SUV segment is gradually increasing with Sazgar forming a dominant market share of 45% of the total Haval SUVs sold in FY24. The SUV market in Pakistan surged to 16,000 units in FY24 and is expected to reach 25,000 units with 60% growth in FY25.

Sazgar has the highest gross margins among all auto sector Companies and achieved 29%, thanks to tax exemptions on auto parts. In the coming years, the luxury TANK-500 HEV is proposed to be launched by FY26 so as to make the company’s portfolio more robust. F25 continues to hold Sazgar with strong growth fundamentals and an attractive FY25 P/E ratio of 4.4x against the sector average P/E ratio of 9.0x.

New car sales for Sazgar’s four-wheelers, which comprise 90% of the company, are projected to increase by 64% YoY to PKR 21,800m by FY25. The company has set a target price of Rs. 1,600 a share, providing the investors a total right point of 46%, mainly due to the highest demand of Hybrid SUVs and its Market share.

With new entrants likely to come into the market such as MG HS PHEV and Honda HR-V HEV, Sazgar has revised its competitive strategy combined with its market dominance, and the capital expenditure of PKR 4.5 billion for the fiscal year 2021-2025 is expected to maintain the high growth and profitability.

What are the analysts saying

According to our database, SAZEW has an average analyst price target for Dec 2025 of Rs. 1482 based on estimates of 5 different analysts. This includes the highest price target of Rs. 1746 by Insight Securities and the lowest price target of Rs. 929 by Arif Habib Limited.

The average analyst price target of Rs. 1482 implies an upside of 43% from here on.