Sazgar Engineering Works Limited (PSX: SAZEW) registered a profit totaling Rs. 4.04 billion during the opening quarter of fiscal year 2027, marking a 9 percent drop from the previous year and a 54 percent quarterly decrease, while earnings per share dropped to Rs. 66.77.

Topline Securities reported that the firm's financial earnings still surpassed forecasts from the industry, backed by stronger gross margins than anticipated.

Sazgar declared an interim cash dividend of Rs. 5 per share along with the financial report, creating a payout ratio of 7 percent against 21 percent during the corresponding period of the prior year.

The brokerage stated that this dividend fell short of predictions in the market.

Sazgar Reports 23 Percent Annual Revenue Growth

Net sales for the firm grew 23 percent compared to the previous year, reaching Rs. 41.71 billion in 1QFY27, boosted by introducing the Tank 500 model. Yet, sales revenue dropped 45 percent from the preceding quarter due to reduced sales volume.

During the period, four wheeler sales reached 3,137 units, marking a 12 percent annual drop and a 50 percent quarterly decline. Conversely, three wheeler sales climbed 45 percent year over year and 4 percent from the prior quarter, hitting 7,735 units compared to 5,346 units in 1QFY26 and 7,408 units in 4QFY26.

Gross Margins Drop Despite Better Than Expected Results

The gross profit margin for Sazgar reached 20 percent for the quarter, down from 25 percent in 1QFY26. Topline Research linked the reduction to increased general sales taxes on hybrid electric vehicles and plug in hybrid electric vehicles, with the business absorbing part of the cost.

Even so, margins stayed above forecasts even though concessionary tariffs on parts and raw materials expired. Topline Research pointed out that the company inventory valued at about Rs. 42 billion in June 2026 probably covered most raw material expenses for the quarter.

Distribution costs climbed 72 percent from the prior year to Rs. 1.7 billion, mainly driven by higher net sales. Administrative costs rose 6 percent annually but dropped 6 percent quarterly, whereas other expenses fell 10 percent year over year and 54 percent from the previous quarter.

Other income grew 22 percent annually but dropped 6 percent quarter over quarter to settle at Rs. 629 million. At the same time, financing expenses surged 4.2 times compared to the previous year, pushed up by increased long term debt.

The effective tax rate for Sazgar was 37 percent in 1QFY27, compared to 39 percent in both 1QFY26 and 4QFY26. Topline Research explained that the decrease matched a 200 basis point reduction in the super tax outlined in the FY27 budget.