Sazgar Reports 27% Profit Growth in H1 FY26 Despite 99% Drop in Quarterly Earnings

SAZEW reported a profit after tax of Rs. 8.4 billion with an EPS of Rs. 139.62 for the first half of FY2025-26, marking a 27 percent increase year-on-year. The company’s 2QFY26 profit stood at Rs. 4 billion with an EPS of Rs. 66.55, up 67 percent YoY but down 99 percent quarter-on-quarter, falling below industry expectations due to lower net sales and higher distribution and marketing costs.

Net sales rose 85 percent YoY and 1 percent QoQ to Rs. 34 billion in 2QFY26, driven mainly by four-wheeler volumes, which more than doubled YoY to 3,653 units and increased 3 percent QoQ. Sales of three-wheelers declined 129 percent YoY but rose 2 percent QoQ to 6,045 units. The net sales underperformance is attributed to a higher share of the lower-priced petrol HAVAL H6 variant.

Distribution expenses increased 91 percent YoY and 52 percent QoQ to Rs. 1.5 billion, exceeding expectations. Gross margins for 2QFY26 were 24.2 percent, compared to 28.4 percent in 2QFY25 and 25.2 percent in 1QFY26, bringing 1HFY26 gross margins to 24.7 percent. Administrative expenses rose 91 percent YoY and 25 percent QoQ, while other expenses increased 54 percent YoY but fell sharply 99 percent QoQ. Other income jumped 2.1 times YoY and 38 percent QoQ to Rs. 709 million. The effective tax rate in 2QFY26 was 39 percent.

The company declared an interim cash dividend of Rs. 15 per share in 2QFY26, raising the 1HFY26 dividend to Rs. 30 per share. SAZEW is currently trading at a projected P/E of 6.8x for FY26 and 5.8x for FY27, reflecting its valuation in the market.