Sazgar Engineering Works Limited (PSX: SAZEW) reported a profit of Rs. 4.04 billion in the first quarter of fiscal year 2027, down 9 percent year over year and 54 percent quarter over quarter, as its earnings per share (EPS) fell to Rs. 66.77.
The company’s earnings nevertheless exceeded industry expectations, supported by higher-than-expected gross margins, according to Topline Securities.
Alongside its financial results, Sazgar announced an interim cash dividend of Rs. 5 per share, translating into a payout ratio of 7 percent, compared with 21 percent in the same quarter last year.
The dividend was lower than market expectations, according to the brokerage.
Sazgar’s Revenue Rises 23 Percent Annually
The company’s net sales increased 23 percent year over year to Rs. 41.71 billion in 1QFY27, driven by the addition of the Tank 500 to its lineup. However, revenue declined 45 percent quarter over quarter due to lower sales volumes.
Four wheeler sales stood at 3,137 units during the quarter, down 12 percent year over year and 50 percent quarter over quarter.
Meanwhile, three wheeler sales increased 45 percent year over year and 4 percent quarter over quarter to 7,735 units, compared with 5,346 units in 1QFY26 and 7,408 units in 4QFY26.
Gross Margins Decline Despite Better Than Expected Results
Sazgar’s gross profit margin settled at 20 percent during the quarter, compared with 25 percent in 1QFY26.
Topline Research attributed the decline to higher general sales tax on hybrid electric vehicles and plug in hybrid electric vehicles, a portion of which the company is absorbing.
However, margins remained above expectations despite the expiry of concessionary tariffs on raw materials and parts. Topline Research noted that the company’s inventory of approximately Rs. 42 billion in June 2026 had likely covered most of the raw material costs for the quarter.
Distribution expenses rose 72 percent year over year to Rs. 1.7 billion, largely due to higher net sales. Administrative expenses increased 6 percent year over year but declined 6 percent quarter over quarter, while other expenses fell 10 percent year over year and 54 percent quarter over quarter.
Other income increased 22 percent year over year but declined 6 percent quarter over quarter to Rs. 629 million. Meanwhile, finance costs increased 4.2 times year over year, driven by higher long-term borrowings.
Sazgar’s effective tax rate stood at 37 percent in 1QFY27, compared with 39 percent in both 1QFY26 and 4QFY26. Topline Research said the reduction was in line with a 200 basis point cut in the super tax under the FY27 budget.
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