Top 5 High ROE Picks According to Topline Securities

Posted by: KSEStocks Data Like: 0 Post Date: July 12, 2025

2. Sazgar Engineering Works Limited (SAZEW)

Expected ROE 2026: 80%

Sazgar Engineering Works Limited (SAZEW) has emerged as one of the most dynamic players in Pakistan’s auto and vehicle manufacturing segment. The company is entering a high-growth phase, with strong earnings forecasts and improving margins driven by its three-wheeler business and growing footprint in four-wheel vehicles.

Earnings Outlook

SAZEW’s forward earnings outlook is one of the most aggressive in the listed space. EPS is projected at PKR 297.2 in FY25 and PKR 302.4 in FY26. This comes on the back of very strong growth, with earnings expected to rise by 126% in FY25, followed by a period of stability in FY26.

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The company’s expansion into new product lines and improved production volumes are expected to underpin this growth momentum.

Dividend Forecast

Dividend per share (DPS) is expected to increase significantly as well:

PKR 53.2 in FY25
PKR 54.2 in FY26

At the current market price of PKR 1 (due to a technical adjustment or unadjusted face value), this implies forward dividend yields of 4% in both years — though the actual effective yield will depend on updated pricing post any corporate actions.

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Valuation

SAZEW trades at extremely low forward price-to-earnings (P/E) ratios, based on these estimates:

4.1x in FY25
4.0x in FY26

These are among the lowest across listed manufacturing firms, signaling significant value — especially if the projected growth materializes.

The price-to-book (PBV) ratio is also expected to compress from 4.8x in FY25 to 2.4x in FY26, reflecting rapid accumulation of retained earnings and strengthening of the balance sheet.

Return on Equity

SAZEW’s return on equity is forecast at:

141% in FY25
80% in FY26

These numbers highlight extremely high capital efficiency, likely supported by low equity base and high margins — although they may normalize as the company scales up further.

Conclusion

SAZEW’s forward projections present a compelling story of high growth and value. The combination of rapid earnings expansion, moderate payout, and low valuation multiples positions it as a high-beta opportunity for investors seeking exposure to Pakistan’s evolving auto sector. While the projections are aggressive, they reflect the company’s expanding market presence and operational leverage.

⚠️ 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 →