Sazgar to reach Rs1,569/share on strong valuation

July 29, 2025(MLN): Sazgar Engineering Works (PXS: SAZEW) is projected to hit Rs1,569/share by June 2026, a potential upside of 26% from its closing price of Rs1,250/share on July 25, 2025.

Arif Habib Limited (AHL) upgraded its investment stance on the stock to “BUY,” citing a robust earnings outlook driven by new model launches, rising volumes, and improving margins.

The firm’s bullish view is based on four major growth pillars: the introduction of CKD variants for the Canon ALPHA and TANK 500 SUVs, accelerating sales momentum in the Haval lineup, improved cost efficiencies through localization, and compelling valuation multiples.

SAZEW is currently trading at a forward P/E of 3.4x for FY26 and 5.2x for FY27 significantly below the auto sector’s average multiple of 8.6x making it an attractive opportunity for investors.

Earnings Momentum Builds

In a recent exchange filing, Sazgar confirmed that its new CKD models, the Canon ALPHA and TANK 500, will be launched before March 2026.

Lately, Sazgar has also brought forward the launch of its Haval Plug-in Hybrid Electric Vehicle (PHEV), with pre-bookings now starting in August 2025.

 If the company meets its estimated FY27 sales targets of 600 TANK 500 units and 2,400 Canon ALPHA units, these models could add Rs16.09/share and Rs50.90/share to earnings per share, respectively.

The company’s flagship Haval brand continues to gain market traction, with FY25 volumes up 102% YoY to 10,800 units.

Haval sales projections for FY26–FY28 are to be 12,500, 13,000, and 13,700 units respectively, according to the estimates by AHL.

Haval sales have grown sharply from 5,374 units in FY24 to an estimated 10,832 units in FY25, a 102% YoY increase. Looking ahead, volumes are projected to rise steadily, reaching 12,457 units in FY26 and climbing to over 15,000 units by FY30.

The consistent upward trend in volumes not only supports earnings growth but also strengthens SAZEW’s positioning in the competitive SUV market, supporting AHL’s positive outlook on the stock.

Lately, Sazgar has also brought forward the launch of its Haval Plug-in Hybrid Electric Vehicle (PHEV), with pre-bookings now starting in August 2025.

Despite an anticipated decline in gross margins in FY27 due to the expiry of auto policy incentives, the brokerage remains optimistic about long-term margin stability.

SAZEW’s Rs11.5 billion capital expenditure on a New Energy Vehicle (NEV) manufacturing plant marks a shift towards localization, which is expected to gradually lift gross margins to 17% by FY27–29, up from earlier estimates of 13%.

The estimates further revealed SAZEW’s earnings at Rs367/share for FY26, Rs240/share for FY27, and Rs254/share for FY28. Dividend payouts are also expected to remain strong, with estimated distributions of Rs92/share and Rs60/share for FY26 and FY27, respectively, improving company’s cash flow profile.

Backing this bullish outlook, Sazgar is estimated to report a 122% YoY increase in profit after tax (PAT), reaching Rs17.61bn (EPS: Rs291.37) for FY25, as per AHL projections. The surge is attributed to higher volumes of Haval SUVs and three-wheelers.

 Copyright Mettis Link News