Sazgar Engineering Works Limited (SAZEW) posted a 27 percent year-on-year increase in profit during the first half of FY26, even as its quarterly earnings plunged sharply due to higher costs and weaker-than-expected sales performance. The automaker reported a profit after tax of Rs. 8.4 billion for 1HFY26, translating into an earnings per share (EPS) of Rs. 139.62, according to its filing released on Tuesday. Despite the solid half-year growth, the company’s second-quarter profit fell nearly 99 percent quarter-on-quarter, raising concerns over cost pressures and margin sustainability. In 2QFY26, Sazgar earned Rs. 4 billion (EPS: Rs. 66.55), showing a 67 percent increase year-on-year but a steep decline compared to the previous quarter. Brokerage house Topline Securities noted that earnings came in below industry expectations, mainly due to lower net sales and a sharp rise in distribution and marketing expenses. “The results were impacted by a weaker sales mix and higher-than-expected operating costs,” Topline Securities said in its assessment. Net sales rose 85 percent year-on-year to Rs. 34 billion in the second quarter, largely driven by strong demand for four-wheelers. Sazgar sold 3,653 units, more than double last year’s volume, supported mainly by the HAVAL H6 lineup. However, analysts believe revenues were constrained due to higher sales of the lower-priced petrol variant, limiting overall value growth. Three-wheeler sales, meanwhile, showed mixed trends. Volumes declined on a yearly basis but improved slightly quarter-on-quarter, reflecting gradual recovery in domestic demand. The company’s gross margin stood at 24.2 percent in 2QFY26, lower than last year but broadly in line with expectations. Rising distribution and administrative expenses, which nearly doubled year-on-year, weighed heavily on profitability. On the positive side, other income surged to Rs. 709 million, helping partially offset cost pressures. Despite the earnings slowdown, Sazgar announced an interim cash dividend of Rs. 15 per share, taking the total 1HFY26 dividend to Rs. 30 per share. The stock is currently trading at a forward P/E of 6.8x for FY26, making it one of the cheaper plays in Pakistan’s auto sector.