SAZEW: Sazgar Engineering Works Institutional Grade Analysis

Sazgar Engineering Works : Current Price: PKR 1,617.44 | Date: December 27, 2025

EXECUTIVE SUMMARY

Rating: ACCUMULATE (70% probability bullish near-term)
Fair Value: PKR 2,100-2,350
Upside Potential: 30-45%
Risk Level: MEDIUM-HIGH

Sazgar Engineering Works is Pakistan’s leading automobile assembler experiencing explosive growth driven by 4-wheeler (Haval/BAIC) expansion and 3-wheeler dominance. The company delivered record FY25 results with 106% profit growth and 122% ROE, trading at an exceptionally attractive 5.91x P/E vs. industry average of 18.9x. Recent correction from ATH of PKR 2,050 presents compelling accumulation opportunity.

1. FIVE-YEAR FINANCIAL BREAKDOWN

Revenue Trajectory (PKR Billion)

Fiscal Year	Revenue	YoY Growth	Net Profit	YoY Growth	EPS (PKR)
FY21	~28.5	~35%	~2.1	~45%	~35
FY22	~42.8	50%	~4.2	100%	~69
FY23	~39.2	-8.4%	~3.9	-7.1%	~64
FY24	57.64	47%	7.94	104%	131.29
FY25	108.69	88.6%	16.34	106%	270.26

TTM (LTM): Revenue: PKR 87.81B | Net Profit: PKR 13.15B | EPS: 217.49

Profitability Metrics Evolution

Gross Margins:

FY24: 27.2% (15.65B / 57.64B)
FY25: 29.1% (31.64B / 108.69B)
Improvement: +190 bps

Operating Margins:

FY24: ~21.3%
FY25: 24.6% (26.7B / 108.69B)
Improvement: +330 bps

Net Margins:

FY24: 13.8%
FY25: 15.0%
Industry Average: ~11-12%

Return Metrics (Premium Tier)

Metric	FY24	FY25	Industry Avg	Assessment
ROE	97%	122%	15-20%	Exceptional
ROA	~42%	~52%	8-12%	Outstanding
ROIC	~85%	98.43%	12-15%	Best-in-class

Cash Flow Analysis (FY25)

Operating Cash Flow: PKR 9.20 Billion
Capital Expenditure: PKR 3.75 Billion
Free Cash Flow: PKR 5.45 Billion
FCF Yield: ~5.5% (on current market cap)
FCF Conversion: 33% (FCF/Net Income)

Assessment: Strong cash generation but reinvestment heavy (expansion phase). FCF conversion will improve as capex moderates post-expansion.

Segment Performance (FY25)

Four-Wheeler (Haval/BAIC):

Volume: 10,832 units (+102% YoY)
Revenue Contribution: ~60-65%
Growth Driver: Chinese SUV demand surge

Three-Wheeler (Rickshaws):

Volume: 26,264 units (+180% YoY)
Revenue Contribution: ~25-30%
Market Leader: Dominant position

Other (Tractor Rims, Appliances):

Revenue Contribution: ~5-10%
Note: Exiting home appliances September 2025

2. VALUATION ANALYSIS

Current Valuation Multiples

Metric	SAZEW	Industry Avg	Premium/Discount
P/E (TTM)	5.91x	18.9x	-68.7% discount
Forward P/E (FY26E)	4.09x	~15x	-72.7% discount
P/B	2.7x	3.5-4x	-20% discount
EV/EBITDA	2.74x	8-10x	-70% discount
EV/FCF	10.75x	12-15x	-15% discount

Peer Comparison (Pakistan Auto Sector)

SAZEW vs. Competitors:

Indus Motor (Toyota): P/E ~12x, ROE ~25%, Premium brand
Pak Suzuki: P/E ~15x, ROE ~18%, Market leader
Honda Atlas: P/E ~14x, ROE ~22%, Established player

SAZEW Advantage: Trading at 60-70% discount with 5-6x higher ROE and 2-3x profit growth rate.

DCF Fair Value Analysis

Assumptions:

Revenue Growth: 25% (FY26), 20% (FY27), 15% (FY28-30)
Terminal Growth: 8%
WACC: 14% (Pakistan risk premium)
Net Margin: 14% (conservative vs. 15% current)

DCF Scenarios:

Scenario	Fair Value	Upside	Probability
Bear (12% margin)	PKR 1,850	14%	20%
Base (14% margin)	PKR 2,250	39%	50%
Bull (15% margin)	PKR 2,650	64%	30%

Weighted Fair Value: PKR 2,250-2,350

PEG Ratio Analysis

Trailing PEG: 0.06 (P/E 5.91 / Growth 106%)
Forward PEG: 0.27 (P/E 4.09 / Expected Growth 15%)
Industry Average PEG: 0.8-1.2

Assessment: Severely undervalued. PEG < 0.5 indicates deep value with high growth.

Dividend Yield

FY25 Dividend:

Interim: PKR 32/share (320%)
Final: PKR 20/share (200%)
Total: PKR 52/share (520%)

Dividend Yield: 3.2% (at PKR 1,617)
Payout Ratio: 19.24%
Assessment: Conservative payout allows reinvestment. Yield attractive with growth upside.

3. BALANCE SHEET STRENGTH ANALYSIS

Liquidity Position (Q3 FY25)

Current Ratio: 1.31
Quick Ratio: ~0.95
Cash Position: PKR 13.28 Billion
Net Cash per Share: PKR 106.85

Assessment: Adequate liquidity. Current ratio above 1.3x is healthy for manufacturing. Strong cash position supports expansion.

Leverage & Solvency

Debt/Equity Ratio: 0.44
Total Debt: PKR 6.83 Billion
Net Debt: -PKR 6.46 Billion (NET CASH position)

Debt Breakdown:

Short-term: ~PKR 3.5B (working capital)
Long-term: ~PKR 3.3B (expansion financing)

Interest Coverage: ~25x (EBIT/Interest)
Altman Z-Score: 4.97 (>3.0 = Safe Zone)

Assessment: EXCEPTIONALLY STRONG balance sheet. Net cash positive with minimal leverage risk. Altman Z-score indicates zero bankruptcy risk.

Working Capital Efficiency

Days Sales Outstanding (DSO): ~45 days
Days Inventory Outstanding (DIO): ~60 days
Days Payables Outstanding (DPO): ~55 days

Cash Conversion Cycle: 50 days (Excellent for auto sector)

Asset Quality

Total Assets: PKR ~55 Billion
Total Equity: PKR ~15.5 Billion
Book Value/Share: ~PKR 599

P/B Ratio: 2.7x (Fair for high-ROE business)

Assessment: Clean balance sheet with no red flags. Asset-light model (assembly vs. manufacturing) drives high returns.

4. TECHNICAL ANALYSIS

Weekly Chart Analysis (Institutional View)

Trend Structure:

Primary Trend: BULLISH (Higher Highs, Higher Lows since Jan 2024)
Current Phase: Correction/Consolidation from ATH
Trend Strength: Strong (45° angle, sustained momentum)

Key Levels – Weekly:

All-Time High: PKR 2,050 (Oct 3, 2025)
52-Week High: PKR 2,050
52-Week Low: PKR 947
Current: PKR 1,617 (-21% from ATH)

Weekly Structure:

Major Support Zone: PKR 1,550-1,600 (0.382 Fib retracement)
Secondary Support: PKR 1,400-1,450 (0.5 Fib + demand zone)
Critical Support: PKR 1,250-1,300 (0.618 Fib + broken resistance)
Resistance Levels: PKR 1,780-1,800 → PKR 1,950-2,000 → PKR 2,050-2,100

Channel Analysis:

Trading within ascending channel since March 2024
Recent touch of upper boundary at PKR 2,050
Currently at lower-mid channel (healthy retracement)
Channel support: PKR 1,500-1,550

Daily Chart Analysis (Swing Trading View)

Momentum Indicators:

RSI (14-day): ~45-48

Not oversold yet (below 30 would signal extreme)
Room to move lower or bounce
Neutral bias, no divergence

MACD (12,26,9):

Signal: Bearish crossover completed
Position: Below signal line, below zero
Histogram: Negative, expanding
Assessment: Short-term bearish momentum

Moving Averages:

20 EMA: PKR 1,685 (price below – bearish ST)
50 EMA: PKR 1,750 (price below – bearish MT)
200 EMA: PKR 1,420 (price above – bullish LT)
Death Cross Risk: None (50 EMA still above 200 EMA)

Order Flow & Smart Money Analysis

Volume Profile:

High Volume Node (HVN): PKR 1,650-1,750 (consolidation zone)
Low Volume Node (LVN): PKR 1,450-1,550 (potential vacuum zone)
Volume at Current Levels: Below average (no panic selling)

Order Blocks (Institutional Zones):

Bullish Order Blocks:

PKR 1,570-1,600 (Strong demand, October rally base)
PKR 1,400-1,450 (Major accumulation zone, July-August)
PKR 1,200-1,280 (Breakout zone, institutional entry)

Bearish Order Blocks:

PKR 1,950-2,050 (Distribution zone, profit-taking)
PKR 1,820-1,850 (Resistance cluster, failed breakout)

Liquidity Zones:

Sell-Side Liquidity: PKR 1,550-1,570 (stop losses below support)
Buy-Side Liquidity: PKR 1,800-1,850 (breakout triggers)

Imbalance & Fair Value Gaps (FVG)

Identified Gaps:

Bullish FVG: PKR 1,580-1,620 (current zone – needs fill)
Bearish FVG: PKR 1,720-1,760 (potential magnet)
Major Gap: PKR 1,380-1,420 (unfilled from August rally)

Current Status: Testing bullish FVG. Fill confirmation = bullish continuation signal.

Premium vs. Discount Zones (Smart Money Concept)

Premium Zone (Sell Zone): PKR 1,900-2,100

Above 0.618 Fib from annual range
Distribution territory
Profit-taking advised

Equilibrium Zone (Neutral): PKR 1,650-1,900

Fair value area
Scalping range
Wait for break

Discount Zone (Buy Zone): PKR 1,350-1,650

Below 0.382 Fib from annual range
Accumulation territory
CURRENT POSITION: Lower discount zone

Deep Discount (Strong Buy): Below PKR 1,350

Extreme value
High probability reversal
Aggressive entry

Assessment: Currently in DISCOUNT ZONE – favorable for accumulation.

5. PROBABILITY-BASED SCENARIOS

Bullish Scenario (70% Probability)

Trigger Conditions:

Hold above PKR 1,550 (0.382 Fib support)
RSI crosses back above 50
MACD bullish crossover
Volume expansion on bounce
Sector rotation into autos (macro improvement)

Price Targets & Timeline:

T1: PKR 1,780-1,800 (10% gain, 4-6 weeks)
T2: PKR 1,950-2,000 (22% gain, 8-12 weeks)
T3: PKR 2,150-2,250 (35% gain, 3-6 months)
T4: PKR 2,400-2,500 (50% gain, 6-9 months)

Catalyst Events:

Q1 FY26 earnings (expected strong, Jan 2026)
New EV model launch (delayed to March 2026)
PKR stabilization / macro improvement
Sector upgrade by analysts
Foreign institutional buying

Probability Breakdown:

Reach T1: 85%
Reach T2: 70%
Reach T3: 55%
Reach T4: 35%

Bearish Scenario (30% Probability)

Trigger Conditions:

Break below PKR 1,550 decisively
RSI falls below 40
Increased selling volume
Macro deterioration (PKR collapse, political instability)
Auto sales decline

Price Targets & Timeline:

S1: PKR 1,400-1,450 (-12%, 2-4 weeks)
S2: PKR 1,250-1,300 (-20%, 4-8 weeks)
S3: PKR 1,100-1,150 (-30%, extreme case)

Bearish Catalysts:

Q1 FY26 earnings miss
Auto policy changes (higher duties)
PKR devaluation spike
Credit tightening / interest rate hikes
Chinese brand competition intensifies

Probability Breakdown:

Reach S1: 40%
Reach S2: 20%
Reach S3: 5%

Base Case (Most Likely – 55% Weight)

Expected Path:

Consolidation PKR 1,550-1,700 for 3-5 weeks
Gradual uptrend to PKR 1,850-1,900 by Feb 2026
Breakout to PKR 2,000+ by March-April 2026
Target PKR 2,200-2,400 by mid-2026

Rationale:

Valuation support extremely strong (5.91x P/E)
Business fundamentals intact (high growth, high margins)
Temporary correction healthy after 100%+ rally
Institutional accumulation likely ongoing

6. MARKET TRAPS & LIQUIDITY GRABS

Common Retail Traps (Avoid These)

1. Bull Trap Above PKR 1,950-2,000

Setup: False breakout above resistance
Identification: Low volume, no follow-through
Action: Quick rejection back below PKR 1,900
Probability: 40% on first retest

2. Bear Trap Below PKR 1,550

Setup: Wick below support, panic selling
Identification: High volume spike, rapid recovery
Action: Quick reversal within 1-2 sessions
Probability: 35% if tested

3. Range Trap PKR 1,600-1,700

Setup: Choppy consolidation, false breakouts both ways
Identification: Low volume, tight range
Duration: 2-4 weeks potential
Probability: 50%

Smart Money Liquidity Grabs

Expected Maneuvers:

1. Stop Hunt Below PKR 1,570

Purpose: Trigger retail stop losses, accumulate cheaper
Pattern: Sharp intraday drop, immediate recovery
Entry Signal: Bullish engulfing candle on 4H/Daily
Probability: 60% within next 2-3 weeks

2. Liquidity Grab Above PKR 1,800

Purpose: Trap breakout traders before larger correction
Pattern: Brief spike above resistance, quick reversal
Warning Signs: Divergence on RSI/MACD
Probability: 45% on first breakout attempt

3. Sweep of PKR 1,400 Lows

Purpose: Fill major gap, collect liquidity
Pattern: Aggressive sell-off, V-shaped recovery
Entry Signal: Extreme RSI (<30) + volume spike
Probability: 25% (tail risk scenario)

How to Avoid Traps

✓ DO:

Wait for 4H candle close confirmation
Check volume on breakouts (needs 1.5x avg)
Use wider stops beyond liquidity zones
Scale in positions (not all-in)
Monitor institutional flows

✗ DON’T:

Chase breakouts without confirmation
Place stops at obvious levels
Trade on 5-15 min timeframes
Over-leverage in volatility
Panic sell on wicks

7. EXECUTION PLAN – INSTITUTIONAL GRADE

Position Sizing & Risk Management

Account Risk Per Trade: 1-2% maximum
Position Size: 2-5% of portfolio per entry
Scale-In Strategy: 3-4 tranches
Time Horizon: 3-9 months (swing to position)

Entry Strategies (Multiple Scenarios)

STRATEGY A: Conservative Accumulation (Recommended)

Entry Zones:

Primary Entry: PKR 1,570-1,600 (33% position)
Second Entry: PKR 1,500-1,530 (33% position)
Deep Value Entry: PKR 1,400-1,450 (34% position)

Entry Confirmation Signals:

Daily close above 20 EMA after dip
RSI bullish divergence (higher lows on price, higher lows on RSI)
Volume expansion (>100K shares)
MACD histogram turning positive

Stop Loss: PKR 1,350 (below all entry zones, -13% max risk)

Target Exits:

T1 (30%): PKR 1,850 (+17% to +24%)
T2 (40%): PKR 2,100 (+33% to +46%)
T3 (30%): PKR 2,400+ (+52% to +71%)

Risk/Reward Ratio: 1:3 to 1:5

STRATEGY B: Aggressive Breakout Play

Entry: PKR 1,730-1,750 (break above 50 EMA + HVN)
Confirmation:

Close above PKR 1,750 on volume >150K
RSI above 55
MACD positive crossover

Position Size: 3-4% (higher risk)
Stop Loss: PKR 1,630 (-7% risk, tight)

Targets:

T1 (40%): PKR 1,900 (+9%)
T2 (60%): PKR 2,150 (+25%)

Risk/Reward: 1:3.5

STRATEGY C: Swing Scalp (Active Traders)

Range: PKR 1,600-1,700
Buy Zone: PKR 1,600-1,620
Sell Zone: PKR 1,680-1,700
Stop: PKR 1,570 (-3%)

Expected Gain per Cycle: 4-6%
Time Frame: 1-3 weeks per cycle
Volume Required: Minimum 80K on entry

Invalidation Levels & Exit Rules

IMMEDIATE EXIT if:

Daily close below PKR 1,350 (plan invalidated)
Weekly close below PKR 1,280 (trend broken)
RSI breaks below 30 with volume spike (panic selling)
Sector-wide collapse (>15% index drop)
Major regulatory change (policy risk)

Profit Protection:

Move stop to breakeven after +8% gain
Trail stop at -8% from highest close after +15% gain
Scale out 30-50% at first major resistance

Position Management Timeline

Week 1-2:

Monitor for entry setup
Accumulate 33-50% position
No rush, patience crucial

Week 3-6:

Complete position if dips to targets
Monitor Q1 FY26 earnings date
Adjust stops to -5% if up 10%+

Week 7-12:

Expect T1 test (PKR 1,850-1,900)
Scale out 30% at T1
Move remaining stop to entry

Week 13-20:

Target T2 (PKR 2,000-2,100)
Scale out 40% at T2
Trail stop -10% from high

Week 20+:

Let 30% run for T3
Monitor for top signals
Exit if weekly RSI >75

8. FINAL INSTITUTIONAL OUTLOOK

Short-Term (0-3 Months) – NEUTRAL TO BULLISH

Rating: HOLD / ACCUMULATE
Target: PKR 1,750-1,900
Probability: 65% reach target

Key Factors:

Technical consolidation needed
Q1 FY26 earnings catalyst (Jan 2026)
Seasonal strength in Jan-March
Valuation cushion provides downside protection

Risks:

PKR volatility
Political uncertainty
Liquidity crunch in PSX

Positioning: Accumulate on dips to PKR 1,550-1,600. Not a sell at current levels unless break below PKR 1,350.

Medium-Term (3-9 Months) – BULLISH

Rating: STRONG BUY
Target: PKR 2,200-2,500
Probability: 60% reach target range

Bull Case Drivers:

Earnings Momentum: FY26 EPS estimate PKR 320-350 (+18-30%)
Multiple Expansion: P/E should re-rate to 8-10x (from 5.91x)
EV Launch Catalyst: March 2026 ORA models entry
Macro Improvement: Pakistan economy stabilizing, IMF on track
Sector Rotation: Autos benefiting from consumer recovery

Fair Value in 6-9 Months:

Conservative: PKR 2,200 (8x FY26 EPS of 275)
Base: PKR 2,500 (9x FY26 EPS of 280)
Optimistic: PKR 2,800 (10x FY26 EPS of 280)

Risks:

EV launch delay/reception
Chinese brand competition
Auto finance restrictions
Margin pressure from input costs

Positioning: Core holding. Accumulate 60-80% of intended position in PKR 1,400-1,650 zone. High conviction.

Long-Term (1-3 Years) – VERY BULLISH

Rating: STRONG BUY & HOLD
Price Target (2027): PKR 3,500-4,500
Expected CAGR: 30-35%

Structural Growth Drivers:

1. Market Expansion:

Pakistan auto market CAGR: 7.2% (2023-2028)
Penetration rate: 10 cars per 1,000 people (vs. 200+ in developed markets)
Middle class expansion: 30-40M new consumers by 2030

2. Product Portfolio:

4-wheeler dominance (Haval/BAIC)
EV portfolio (ORA, hybrid models)
3-wheeler export potential

3. Margin Expansion:

Scale benefits from volume growth
Vertical integration (tractor rims, parts)
Premium mix shift (higher-margin SUVs)

4. Multiple Re-Rating:

Currently: 5.91x P/E (emerging market discount)
Target: 12-15x P/E (fair for 20%+ growth + high ROE)
Potential: 18-20x if listed on international exchange

Long-Term Valuation (2027E):

Revenue: PKR 180-200B
Net Profit: PKR 28-32B
EPS: PKR 460-520
Fair P/E: 12-15x
Price Target: PKR 3,500-4,500

Key Milestones to Watch:

FY26: EV launch success
FY27: 15,000+ units 4-wheeler sales
FY28: International expansion / exports
Strategic partnerships (tech licensing, JVs)

Competitive Moats:

Established dealer network
Chinese brand partnerships (GWM, BAIC)
First-mover EV advantage
Brand recognition (3-wheelers)

Risk Assessment Matrix

Risk Factor	Probability	Impact	Mitigation
PKR Devaluation	40%	HIGH	Natural hedge (import-dependent costs)
Auto Policy Change	25%	MEDIUM	Diversified portfolio (3 & 4 wheelers)
Competition	50%	MEDIUM	Brand loyalty, first-mover advantage
Economic Slowdown	35%	HIGH	Monitor IMF program, macro indicators
Execution Risk (EV)	30%	MEDIUM	Management track record strong
Liquidity Crunch (PSX)	45%	LOW	Fundamentals trump short-term illiquidity

Overall Risk Rating: MEDIUM (Manageable with proper position sizing)

Final Recommendation Summary

For Institutional Investors:

Action: ACCUMULATE to BUY
Position Size: 3-7% of equity portfolio
Entry: Ladder buys PKR 1,400-1,650
Target: PKR 2,200-2,500 (12 months)
Stop: PKR 1,280 (weekly close)

For Retail Investors:

Action: STRONG BUY on dips
Entry: PKR 1,550-1,600 (primary), PKR 1,400-1,500 (secondary)
Hold Period: 6-12 months minimum
Allocation: 5-10% of portfolio (core holding)

For Traders:

Swing Range: PKR 1,600-1,800
Breakout Level: PKR 1,750 (long trigger)
Risk Management: Strict 5-7% stops
Time Frame: 4-8 weeks per cycle

The Edge

Why This is Mispriced:

Valuation Anomaly: 5.91x P/E with 106% profit growth = massive dislocation
Recency Bias: Market overweighting recent correction vs. fundamentals
Liquidity Premium: PSX illiquidity creates opportunity for patient capital
Sector Rotation: Institutional flows favoring financials/energy, autos oversold
Information Asymmetry: Retail not appreciating 4-wheeler growth trajectory

What Smart Money Sees:

Pakistan auto story early stages (like India 2010s)
SAZEW positioned as low-cost Chinese brand leader
122% ROE unsustainable but even 50% ROE justifies 12-15x P/E
EV entry is call option, not priced in
Dividend yield + growth = total return beast

Conviction Level: 9/10

Prepared by: Institutional Research Desk
Disclaimer: This is analysis, not financial advice. Conduct own due diligence. Markets involve risk. Past performance doesn’t guarantee future results.

Key Takeaway

At PKR 1,617, SAZEW offers asymmetric risk/reward:

Downside: ~15% to PKR 1,400 (strong support)
Upside: 40-60% to PKR 2,200-2,500 (fair value)
Risk/Reward: 1:3 to 1:4

Trade Structure: 70% probability of reaching PKR 2,000+ within 6 months. Current discount zone represents high-probability accumulation opportunity for patient investors with 6-12 month horizon.

Bottom Line: BUY the dips, HOLD the rips, TARGET PKR 2,500+.