Sazgar Engineering Works Limited (SAZEW) reported four-wheeler sales of 584 units in November 2024, reflecting a 42% MoM decline. This drop is primarily attributed to the typical year-end effect, where buyers prefer vehicles with a new-year registration. Customers often delay purchases as they prefer deliveries with the print of the new year, as newer registrations tend to enhance resale value.

§  As a result, car sales typically slow down in November and December, with many buyers postponing deliveries until the new year. This pattern is a common trend in Pakistan’s auto sector.

§  Contrary to the sales decline, production numbers remained almost flattish MoM (down by a mere 1%), signalling robust demand for the product to be delivered in January 2025. Our channel checks in dealerships suggest that dealers are offering 2025 registrations to customers.

§  This trend was also visible in SAZEW’s sales last year, when the company recorded an 89% MoM drop in Dec 2023 four-wheelers’ sales, followed by a rebound in Jan 2024, recording 967 units, 3.9x higher than the monthly average of Jul-Nov 2023.

§  If this lower sales trend persists in December 2024, then in January 2025, sales can jump to over 1,700-2,000 units, clearing inventory produced in November and December 2024.

§  HAVAL currently has a standard delivery time of up to 3 months, while ready deliveries are available with some nominal own (premium) amount.

§  That said, we maintain our BUY stance on SAZEW with an FY25E and FY26F PE of 4.17 and 3.57x compared to auto sector PE of 9.1x and 7.2x, respectively. The company also offers dividend yields of 6% and 7% based on the annual sales numbers of 10,993 (monthly average: 916) and 11,543 units (monthly average: 962) for FY25 and FY26, respectively.

Courtesy – Topline Research