Sazgar continues rally amidst automotive downturn 

The company recorded with a 552.86% QoQ increase, and a 17 fold YoY increase in its Q3FY23 earnings 

LAHORE: Sazgar reported its Q3FY23 earnings to the Pakistan Stock Exchange (PSX), declaring a final earning of Rs 444 million for the quarter. This represents a 552.86% quarter-on-quarter (QoQ) increase from the Rs 68 million recorded in Q2FY23. The figure also shows a 1689.35% year-on-year (YoY) increase from its Q3FY22 earning of Rs 24.8 million. The company ended the 9MFY23 period with a final earning of Rs 523.7 million, which is a 343.86% YoY increase from its Rs 117.99 million in 9MFY22 earnings.

Q3FY23 Performance

Sazgar’s sales revenue for the quarter was Rs 7.9 billion, representing increases of 147.91% QoQ from its Rs 3.1 billion and 176.33% YoY from its Rs 2.859 billion. The cost of goods sold also rose to Rs 7.031 billion, amounting to increases of 139.79% QoQ for an increase of Rs 4.099 billion and 162.05% YoY for an increase of Rs 4.34 billion. Sazgar’s gross profit was Rs 871 million, a QoQ increase of 241.13% from its previous Rs 255 million and a YoY increase of 393.46% from last year’s Rs 176.5 million. The company’s gross profit margin (GPM) was also higher at 11.02%, compared to last quarter’s 8.01% and last year’s 6.17%.

Other highlights for the company include an increase in other income and changes in its cost of finance. The company’s other income rose to Rs 13.8 million, representing a 669.6% QoQ increase from its Rs 1.79 million in Q2FY23 and a 204.46% YoY increase from its Rs 4.544 million in Q3FY22. The company’s cost of finance for the quarter was Rs 42.4 million, a 1.5% QoQ decrease from its Rs 43.1 million in Q2FY23 but a 202.53% YoY increase from its Rs 14 million cost of finance from last year.

Sazgar’s tax expense for the quarter rose to Rs 213.27 million, an increase of 1981.05% QoQ and 322.2% YoY. Its effective tax rate (ETR) was 32.42%. This ETR was significantly higher than the 13.08% in Q2FY23 but lower than the 67.03% in Q3FY22. The company’s final earnings for the quarter were Rs 444.63 million, which was Rs 376.5 million higher than its final earnings of Rs 68.1 million in Q2FY23 and Rs 419.781 million higher than its Rs 24.848 million in Q3FY22.

9MFY23 Performance

The company’s sales revenue for 9MFY23 rose to Rs 12.59 billion, a 78.04% YoY increase from the Rs 7 billion recorded last year. Its cost of sales rose by 73.45% YoY to Rs 11.3 billion from the previous Rs 6.515 billion. However, the cost of goods sold as a percentage of sales revenue fell from 92.12% last year to 89.75%. This improved the company’s GPM from 7.88% to 10.25%, with the gross profit itself increasing by 131.61% YoY to reach Rs 1.29 billion from the previous Rs 557.5 million.

The company’s other income rose by 74.79% YoY from Rs 10 million to Rs 17.6 million, while its cost of finance spiked by 319.11% YoY from Rs 31.7 million to Rs 133.218 million. The company’s tax expense for 9MFY23 also rose by 160.79% YoY from Rs 290 million to Rs 756.53 million, while its ETR reduced from last year’s 59.32% to 30.77%. The company’s final earnings  stood at Rs 523.7 million, a 343.86% YoY increase from its previous Rs 117.9 million.

What’s going on then? 

“The significant increase in sales revenue can be attributed to their four-wheeler segment, which saw a rise in both selling price and volume,”  says Saad Khan, Head of Research and Investment at IGI Finex Securities. “This was primarily due to the fact that their competitors had higher prices and longer delivery times. With imports remaining closed, companies that offered more affordable alternatives reaped immense benefits from the challenges faced by the auto sector,” Khan adds.

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Daniyal Ahmad
Daniyal Ahmad
The author is a member of the staff, and covers the automobile, energy and advertising insdusties as a sector analyst. He can be reached at [email protected]


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