Sazgar Eyes Car Export Markets in Egypt and Thailand

Sazgar Eyes Car Export Markets in Egypt and Thailand

Karachi, May 23, 2024 — Sazgar Engineering Works Limited has set its sights on expanding into the car markets of Egypt and Thailand as part of its strategic expansion plan.

During a corporate briefing held yesterday, the company’s management outlined their focus on diversifying into environmentally friendly cars, expanding the local dealership network, and exploring new export markets.

Key Highlights from the Corporate Briefing:

• Financial Performance: Sazgar reported a profit of PKR 3.03 billion (EPS: PKR 50.2), marking a 3.01x increase quarter-over-quarter (QoQ) and a 5.82x increase year-over-year (YoY). The topline improved by 2.09x QoQ and 1.54x YoY, reaching PKR 7.9 billion. The gross margin stood at 25.82% in March 2024, up from 14.03% in June 2023.

• Hybrid Cars Success: Sazgar is offering two hybrid car models, Jolion HEV and H6 HEV, catering to different market segments to avoid cannibalization. The prebooking of locally manufactured CKD models for the HAVAL Jolion HEV has been successful, with the first batch scheduled for delivery in June 2024. Hybrid models have constituted 70%-90% of sales thus far.

• Capacity Utilization: The current capacity utilization for SUVs stands at 15%, with the management aiming to increase it to 35%-40% this year in response to enhanced demand.

• Healthy Margins: Sazgar’s margins have been bolstered by the three-wheeler segment and the mature lifecycle stage of competitor models, which have lower margins. The burgeoning growth in the three-wheeler cargo segment is expected to continue into FY25.

• Dealership Network: Sazgar currently has over 50 dealers for three-wheelers and 16 for four-wheelers, with plans to expand depending on demand.

• Capital Expenditure: The company has consistently invested in capital expenditure, increasing its Property, Plant, and Equipment from PKR 2.8 billion in March 2023 to PKR 4.3 billion in March 2024.

• Electric Vehicles (EVs): The management expressed concerns over the high cost of imported batteries for EV rickshaws, which hampers growth. However, they believe that the implementation of swappable batteries could lead to steady growth in this segment.

• Production Capacity: The production capacity has been enhanced, reducing the waiting period for Haval cars from 4-6 months to 2-3 months.

• Market Segmentation: The company has chosen not to enter the highly price-sensitive A-segment (below PKR 5 million), dominated by PSMC, due to low margins.

• Localization Efforts: In adherence to the Auto Industry Development and Export Policy (AIDEP) 2021-2026, Sazgar employs a thorough process in selecting its vendors to ensure localization.

• Future Prospects: Sazgar plans to remain within the automobile industry and will not explore investments in other sectors. The company’s future pricing strategies will be influenced by changes in the budget and improving PKR parity.

The company’s stock is currently trading at a P/E of 415.25 and P/B of 89.45, reflecting investor confidence in its strategic direction. With an eye on new markets and continuous improvement in operational efficiency, Sazgar is poised for significant growth in the coming years.