SAZEW announced a profit after tax (PAT) of Rs. 8.4 billion (EPS of Rs. 139.62) for the first half of FY2025-26, up 27 percent year-on-year (YoY).
Its 2QFY26 results showed a profit of Rs. 4 billion (EPS of Rs. 66.55), up 67 percent YoY but down 99 percent quarter-on-quarter (QoQ). According to Topline Securities, these results came below industry expectations due to lower-than-expected net sales and higher-than-expected distribution and marketing expenses.
Net sales surged 85 percent YoY and 1 percent QoQ to Rs. 34 billion in 2QFY26. This trend was largely driven by four-wheeler volumes, which increased 2.3x YoY and 3 percent QoQ, with sales clocking in at 3,653 units, compared to 1,586 units in 2QFY25 and 3,557 units in 1QFY26. Net sales were lower than expected, likely due to a higher mix of the lower-value petrol variant of the HAVAL H6, in our view.
Three-wheeler sales fell 129 percent YoY but rose 2 percent QoQ to 6,045 units in 2QFY26, versus 6,906 units in 2QFY25 and 5,907 units in 1QFY26.
Distribution expenses rose 91 percent YoY and 52 percent QoQ to Rs. 1.5 billion, higher than expectations. We await the release of detailed accounts for further clarity.
The company reported gross margins of 24.2 percent in 2QFY26, in line with our expectations, compared to 28.4 percent in 2QFY25 and 25.2 percent in 1QFY26. This takes 1HFY26 gross margins to 24.7 percent, versus 28.7 percent in 1HFY25.
Administrative expenses rose 91 percent YoY and 25 percent QoQ, while other expenses increased 54 percent YoY but declined 99 percent QoQ.
Other income rose 2.1x YoY and 38 percent QoQ to Rs. 709 million in 2QFY26.
The effective tax rate in 2QFY26 stood at 39 percent, compared to 43 percent in 2QFY25 and 39 percent in 1QFY26.
Alongside the results, the company announced an interim cash dividend of Rs. 15 per share in 2QFY26 (payout ratio: 239 percent). This brings the 1HFY26 dividend to Rs. 30 per share (payout ratio: 21 percent).
The company is currently trading at an FY26E/FY27F P/E of 6.8x/5.8x.