LAHORE: Sazgar Engineering (PSX: SAZEW) stands tall as one of Pakistan’s largest rickshaw manufacturers since its establishment in 1991, with manufacturing facilities situated in Lahore.
Besides producing auto rickshaws, the company diversifies its offerings to include tractor wheel rims and household appliances. Recently, the company took a significant stride into the four-wheeler market by introducing an SUV. While the plant’s current capacity allows for the annual production of 20,000 rickshaws, the automotive facility can assemble 24,000 units in a single shift.
Despite Sazgar’s prior focus solely on assembling rickshaws, the company capitalized on the benefits presented by the Auto Development Policy 2016-21. This move led to strategic collaborations with esteemed brands such as BAIC and HAVAL for vehicle assembly and technical cooperation. Notably, in FY23, the company marked a groundbreaking achievement by introducing Pakistan’s inaugural locally-assembled hybrid electric vehicle.
The three-wheeler market in Pakistan witnessed substantial growth over recent decades, with an influx of assemblers introducing various options. Sazgar initially experienced a surge in sales, reaching 21,000 units in FY18, yet faced a decline thereafter due to reduced demand, maintaining a market share of 30-35%. Despite the industry downturn, Sazgar remarkably increased its market dominance to an impressive 49% in FY23, outpacing competitors like Qinqqi and United Auto.
However, the company’s success wasn’t solely tied to market fluctuations. Despite dwindling three-wheeler sales post-FY18, Sazgar strategically shifted gears, focusing on financial performance. The company witnessed a remarkable turnaround in its financials, experiencing a 4.5x revenue increase and a staggering 13x rise in earnings between FY21 and FY23. Net margins also improved significantly to 5% in FY23 from 2% in FY21, marking the company’s first dividend offering in five years by the outgoing fiscal year.
Interestingly, Sazgar’s revenue composition underwent a substantial transformation. While 55% of its revenue stemmed from four-wheelers in FY22, this figure skyrocketed to a whopping 81% in FY23, with SUV sales notably propelling the company’s growth. Despite this shift, the 9,000 units of rickshaws and additional units like tractor rims contributed 19% to the overall revenue, signifying a diversified revenue stream beyond four-wheelers.
Ultimately, Sazgar’s strategic shift from relying solely on domestic demand to expanding into new markets and segments, coupled with a dynamic financial strategy, led to its remarkable growth and altered revenue profile.
