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جو شخص بہانہ بنانے میں بہت اچھا ہو ، وہ کسی اور کام میں اچھا نہیں ہو سکتا
پیسہ بدترین آقا ہے، مگر بہترین غلام بھی ہے
کسی فرد یا قوم کو برباد کرنا ہے تو اس کی امید کو مار ڈالیے اور اگر اسے تعمیر کرنا ہے اس کی امید کا دیا روشن کیجئے
کامیابی سوچ سے ملتی ہے
زندگی کی دوڑ میں دوسروں سے آگے نکلنے کیلئے تیز چلنا ضروری نہیں، بلکہ ہر رکاوٹ کے باوجود چلتے رہنا اور مسلسل چلتے رہنا ضروری ہے
جب باتیں آمنے سامنے ہوتی ہیں تو جھوٹ اور غلط فہممی کا خاتمہ ہو جاتا ھے
بہت اونچے پہاڑ پر چڑھنے کے لئیے قدم آہستہ آہستہ اٹھانا پڑتے ہیں
تین چیزیں نیکی کی بنیاد ہیں، تواضع بے توقع, سخاوت بے منت اور خدمت بے طلبِ مکافات
غربت اور افلاس کی وجہ پیداوار کی کمی نہیں، بلکہ اسکی غلط تقسیم ہے
دولت ہونے سے آدمی اپنے آپ کو بھول جاتا ہے اور دولت نہ ہونے سے لوگ اس کو بھول جاتے ہیں
By: Topline Securities (Private) Limited
Following the announcement of financial results for 2016 and recently held analyst briefing, we have revisited and revised up our EPS estimates to Rs10.8, Rs 12.5 and Rs13.9 for the year 2017, 2018 and 2019, up 33%, 32% and 30%, respectively. We reiterate our ‘Buy’ stance on the scrip, with a new target price of Rs135.
Revisions in our earnings estimates stem from upward revision in our volume assumptions for air conditioner sales and deep freezer sales, while lower effective tax rate of 18% on the back drop of tax shield amounting to Rs3.8bn will further provide support to the company’s bottom line.
PAEL’s appliances sales mix is dominated by the ‘Refrigerator and Deep freezer’ segment, contributing 90% to the appliances' revenues. We foresee the segment to post a 3 year (2017-2019) sales CAGR of 25%. At present, refrigerator penetration in Pakistan stands at 43% compared to the world average of 85%, depicting a significant potential to generate considerable demand. Accordingly we expect refrigerator sales volumes to grow at a 3 Year (2017-2019) CAGR of 12%.
We have revised up our assumption for deep freezer sales to 100K units in 2017, where we foresee deep freezer sales to grab a pie of 17% by 2019 in appliances sales mix as compared to the current share of 9%.
To point out, air conditioner sales stood at ~32k units in 2016, up 70% YoY, while the management stated that the segment has already managed to sell this much units in 1Q2017 where recently introduced inverter air conditioners with heat and cool function gained positive reception from the costumers (85% of the current air conditioner sales mix). We foresee, air conditioners sales to clock in at ~90k units in 2017 and post a 3 year CAGR (2017-2019) of 51%.
FINANCIAL RESULT FOR THE FIRST QUARTER ENDED 31/03/2017
(UNCONSOLIDATED) PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 920.269
(UNCONSOLIDATED) PROFIT/LOSS AFTER TAXATION RS. IN MILLION 683.191
EPS = 1.35
FINANCIAL RESULT FOR THE FIRST QUARTER ENDED 31/03/2017
(CONSOLIDATED) PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 1396.074
(CONSOLIDATED) PROFIT/LOSS AFTER TAXATION RS. IN MILLION 1105.206
EPS = 2.20
Result Previews: 1HCY17
PAEL –EPS to show a growth of 35% QoQ
We expect the company to post PAT of PKR 1,486mn translating into EPS of PKR 2.99 during 2QCY17, up by 35% QoQ. This is attributable to a 17% QoQ rise in net revenue led by appliances segment on the back of robust sales of both air conditioners and refrigerators. Moreover, GM’s are expected to remain robust at 31%, flattish on a QoQ basis. Finance cost is expected to decline by 16% QoQ due to lower banking and commission charges. Our estimates also incorporate impact of super tax (PKR 0.25/sh). During 1HCY17E, PAEL’s bottom-line would clock-in at PKR 2,590mn (EPS: PKR 5.20) compared to PKR 2,265mn (EPS: PKR 4.55) up by 14% YoY. Alongside the result, the company is anticipated to declare a divided of PKR 1.50/share.
As per latest result announcement, Pak Elektron Limited (PAEL) has posted earnings of PKR 1,626mn (EPS: PKR 3.24) vis-à-vis PKR 1,734mn (EPS: PKR 3.46) in SPLY. This took profitability over the half year period to PKR 2,731mn (EPS: PKR 5.44), depicting a rise of 21% YoY.
PAEL recorded net revenue of PKR 10,515mn during 2QCY17 which is up by 2% YoY, in-line with our expectations. The meager growth in topline is owed to huge discounts allowed to customers that subsided the impact of volumetric sales growth.
Gross margins for the period dwindle by 170bps compared to SPLY attributable to higher discounts offered by the company in its applainces products.
Meanwhile, Finance cost portrayed a decline of 21% YoY to PKR 338mn due to lower banking and commission charges.
Effective taxation clocked-in at 12.3% during the said period (2QCY17: 11.6%).
FINANCIAL RESULT FOR THE HALF YEAR ENDED 30/06/2017
(UNCONSOLIDATED) PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 1,126.328
(UNCONSOLIDATED) PROFIT/LOSS AFTER TAXATION RS. IN MILLION 1,015.609
(UNCONSOLIDATED) EPS = 2.00
(CONSOLIDATED) PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 3,249.829
(CONSOLIDATED) PROFIT/LOSS AFTER TAXATION RS. IN MILLION 2,730.826
(CONSOLIDATED) EPS = 5.44
DIVIDEND = 15%
BOOK CLOSURE FROM 11/09/2017
BOOK CLOSURE TO 17/09/2017
We revise downwards our Jun’18 target price for Pak Elektron Limited (PAEL) to PKR117.1/share,offering an upside potential of 52%. Our reviewed investment thesis is premised on i) revenue growth expected at a 3-yr CAGR of 20% amid boost in the volumetric growth in Appliances, and subsequently ii) 3-yr projected earnings CAGR at a robust 19%. We expect earnings in CY17E / CY18F to clock-in at PKR 4,087mn / PKR 5,308mn i.e. EPS of 8.13 / 10.58.The stock is currently trading at CY17E and CY18F PE of 9.4x and 7.3x, respectively.
Ample growth in volume and price during 1HCY17 depict highest ever sales of PKR 19.65bn compared to PKR 13.24bn in 1HCY16 (up by 48.40%YoY), contributing 76% to the total gross revenues. We owe significant spurs in consumer-led appliances demand to visible macro-economic performance and rising income per capita. In particular, air conditioners, refrigerators and deep freezers showed a tremendous volumetric growth of 229%, 25% and 42% YoY, respectively. Going forward, introduction of the new “inverter series” in the current year to an over-whelming market response is anticipated to swell revenue by 36% in the appliances division. Furthermore, forecasted sales in appliances division is set to increase at a 3-year CAGR of 33%.
Power: Slow and Steady
On the contrary, power division of the company observed sluggish performance as revenue took a beating to PKR 5.0bn in 1HCY17 vis-à-vis PKR 6.77bn in 1HCY16 (-26%), due to deferred contracts of power transformers by the government. Although revenues of power may slow down by 22% YoY in CY17, we project recovery in 2H given the governments increased focus on power generation amid election year. While going forward, we believe the division is set to improve in 2HCY17 as sustenance stems from confirmed order intakes of switch gears equipment recently prequalified by K-electric.
Outlook & Recommendation
We riterate our stance on gross margins to remain stable at 30% given robust demand in the subsequent years along with the company benefitting from large scal economies. We further expect sales to remain robust with sturdy volumetric statistics conjectured in upcoming years. We also accentuate the company’s future plans to rebrand its appliances division by means of new products to tap the growing market dynamics and needs. PAEL is also poised well for the forthcoming progress in the power sector including IPP’s, expected privatization of DISCOS and massive demand of housing schemes.
PAEL was incorporated as a public limited company on March 03, 1956 and its registered office is situated in Lahore. The main activities of the company is to manufacture and sale electrical capital goods and domestic appliances.
PAEL is currently operating in two segments i) Appliances (Refrigerators, Air Conditioners, Deep freezers, Microwave oven, water dispensers, and other home appliances) ii) Power Division (Transformers, switchgears, energy meters, and EPC).
Financial Performance 9MCY17
In 9MCY17, company reported revenues of PKR 33.8bn against PKR 27.1bn in SPLY, up by 24.92% YoY due to a healthy growth of 41.17% YoY in th appliances division (Air conditioner +206%, Microwave oven +264%). However,
power division was marginally down by 1.4% YoY due to decline in power transformer business by 78% YoY. Gross margins of the company slightly down by 0.7pps to 29.6% as compared to 30.3% in SPLY due to higher discounts of~PKR 4bn. Admin and finance cost of the company went up by 30.8% YoY and
3.1% YoY. Consequently, EPS of the company clocked in at PKR 5.91 as against PKR 6.24 in SPLY
Financial Performance 3QCY17
In 3Q consolidated revenue of the company clocked in at PKR 8.0bn as against PKR 7.1bn in SPLY, up by 12.7% YoY. Gross margins of the company went down by 1.9pps YoY to 22.5% against PKR 24.4% in SPLY. Distribution cost and
finance cost of the company went up by 86.5%/35.4% YoY respectively. As a result EPS of the company went down by 69.9% YoY to PKR 0.46 against PKR 1.53 in SPLY.
Following the government initiative to eliminate load shedding, the company iss optimistic about its future performance. The country is likely to witnessindustrial boom coupled with planned investments in economic zones which will help company to grow its revenues from bothpower and appliancesdivisions. Moreover, company is working on new designs and prototypes for all products in power division to rationalize cost by not compromising on quality.
Pak Elektron (PAEL): 1Q2018 EPS of Rs1.1, -52% YoY (+59% QoQ); (Below expectations)
25 April 2018
Topline Securities (Private) Limited
Pak Elektron (PAEL) announced 1Q2018 consolidated earnings of Rs536mn (EPS Rs1.1/share), below our expectations mainly owing to lower sales.
Net sales of the company took an expected downturn during the outgoing quarter, -29% YoY primarily on the back of lower sales from appliances segment. Refrigerator which contributes more than 50% to PAEL’s appliances revenues witnessed volumetric decline of more than 20%, as per channel checks.
Air conditioner, another major revenue driver of appliances segment witnessed double digit decline in volumes during 1Q2018. We believe that this was due to competition from Chinese brands like Haier and Gree. Also, the company did aggressive marketing in 1Q2017 that led to higher appliances sales, as per channel checks.
Pakistan Elektron Limited (PAEL): Price Decline Bring Stock in Limelight- BUY
09 May 2018
Abbasi Securities (Private) Limited
PAEL share price has declined by ~15% since CYTD which has brought the stock in limelight. PAEL is currently trading at CY18E and CY19E P/E of around 7.8x and 7.3x respectively. We have a BUY stance on the scrip with a target price of Rs54 (possible upside 28%).
With the disappointing sales performance in the home appliances division in 1QCY18 we expect PAEL home appliance’s segment sales to bounce back owing to 1) seasonal demand of air conditioners and refrigerators 2) improved personal income 3) improved standard of living and urbanization trend and 4) improvement in electricity availability
Major power projects are about to commence in the near future, now we expect the focus of govt. on improvement in T&D network. We expect PAEL being the market leader in transformer and switch gear will be the major beneficiary.
Pak Elektron Limited (PAEL): 2Q18: A make or break quarter
16 May 2018
EFG Hermes Pakistan Limited
Pak Elektron has continued to disappoint on revenue and profitability guidance, and thus we cut our EPS estimates by 23% in 2018e and 21% in 2019e and lower our TP by 26% to PKR53. Some of the issues have been self-inflicted (weak planning), while others have been more market related (competition and timing of certain tenders).
That said, we still believe that sector LT structural growth dynamics remain intact, given competitors are still growing (Dawlance) and electricity generation continues to rise.
Although, earnings/guidance misses have diluted our/ market confidence in mgmt. execution, we believe this is reflected in the stock’s valuation – as the bad news is already priced in, any positive outcome will be taken as a surprise. In our opinion, if mgmt. is able to execute effectively in 2Q18, the peak appliance selling season (appliance dealers have indicated that sales trends are quite robust so far), it should provide a positive share price catalyst – if, however, its 2Q18 results continue to disappoint, we would turn more bearish. At 7.7x 2018e P/E, we reiterate our Buy rating on the stock
Pak Elektron (PAEL): Earnings Revised - ‘Buy’ Maintained
07 June 2018
Topline Securities (Private) Limited
We reiterate our ‘Buy’ stance on Pak Elektron (PAEL), Pakistan's one of the biggest home appliance and power equipment manufacturers, despite its weak performance in 1Q2018 (owing to strategic reasons to some extent while increasing competition also affected sales).
After incorporating 1Q result, we tweak our assumptions for PAEL and tone down its EPS estimates by 15/22/32% to Rs5.3/6.0/6.3 in FY18E/FY19F/FY20F.
However, since the stock has come down 18/65% in 2018/FY18YTD and has underperformed the market by 26/57%, this provides an attractive entry point in our view.
We ignore the recent market noise/rumors of any disruption in PAEL's distribution network as our dealer and channel checks indicate encouraging sales so far.
Moreover, contrary to market perception, the company’s power division seems to be progressing fine despite World Bank’s debarment of PAEL and its affiliates back in Feb-Mar 2018.
Pak Elektron Ltd (PAEL PA): Multipliers come in all shapes & forms
07 June 2018
AKD Securities Limited
We initiate coverage on Pak Elektron Ltd (PAEL PA) with a Buy rating having a Dec'18 TP of PkR51.70/sh. Rising consumer durable spending propagated by rapid urbanization and favorable demographics are slated to amplify White Goods purchases while distribution focused commercial energy CAPEX push power equipment demand. Both undergo upswings from existing but undisciplined infrastructure and consumer durable consumption patterns maintaining a long-term demand sweet-spot for PAEL. That said, we also highlight medium-term competitive pressures in the appliance segment and public-sector governance risks as weighing on earnings.
Grounded in these, sturdy demand is forecasted with a 5-yr gross sales forward CAGR of 19.5% (vs. ~16% during CY12-17A). However, passing-on the high cost of directly imported materials (66% of total COGS) remains challenging in an environment where the currency is under pressure, translating into CY18-22F average GM of 27.4% vs. 30.4% during CY14-17A. Resulting NPAT growth (5-yr forward CAGR of 12.7%) postures for re-rating as the stock currently trades at a CY18/19F P/E of 6.3/5.1x and PEG ratio of ~0.26x. At current price level, the stock provides upside of 34.2%.
Balance sheet revival going steady: PAEL's valuation set has firm grounds for re-rating as a conducive environment for demand endows balance sheet health, guarding against swings in profitability and working capital. Catalysts in consumer appliance are conducive to our growth outlook supported by high relative market shares. A follow-on, is the ability of PAEL to taper its debt burden. Facing a weakened PkR vs.
US$ outlook, our sensitivity shows that every 1% increase in long term PkR depreciation, assuming only 50% of the cost is passed-on (our base case is 80%) reduces earnings by ~6% or PkR0.62/sh and softens gross margins by ~70bps from our base case. Additionally, swings in fair value and debt levels (using average net debt to EBITDA) indicate that just a 10 day increase in annual average DIO and DRO reduces fair value by PkR~6/sh (PkR3.04bn), while compensating for the same through leverage raises net debt by ~9% (additional borrowing of PkR1.77bn). Markedly, the working capital cycle is a crucial source of stress on valuations.
Pak Elektron Limited(PAEL): Buy intact, despite downward revision
07 June 2018
Foundation Securities (Pvt.) Limited
We reduce our earnings print for Pak Elektron (PAEL PA) as increased competition in the white good segment would restrict its topline growth. Furthermore, macro headwinds would also be a dampening factor for consumer durable market, in our view. Besides, we also incorporate the reflection of (1) super tax and (2) reduced corporate tax in our earnings projections. We significantly reduce our CY18/19 earnings estimates by 45%/48% and reduce our Dec-18 TP to Rs51.5/sh. Lower earnings print would also reduce the benefit of remaining tax credit on right issue from ~Rs2.9bn (Rs5.8/sh) to Rs1.3bn (Rs2.6bn) to be availed in next 3 years.
Intense competition in white good segment: Influx of Chinese names like Chenghong Ruba, Electrolux and Haier had already perturbed the segment dynamics. The competition has become more intense after revival of other domestic players like Dawlence, in our view. This comes at a junction when macro consolidation may restrict the demand of the white good segment, going forward. We do believe this would also constrain margins given jostling for market share. We estimate PAEL’s appliance sales to reduce by ~9% in CY18, but also lower 5-years sales CAGR to ~13%.
Govt transition to add woes to power segment: Demand of power segment has also been sluggish that has not been according to our estimates. The demand to remain sluggish given (1) PAEL’s Worldbank’s disbarment and (2) lower PSDP disbursement. Transition of government would also be a dampening factor in the near-term, however we do expect segment demand to pick up from FY19. as we believe the incoming government would remain committed to ending circular debt in the country.
Pak Elektron Limited (PAEL): Recent underperformance overshadows volatile history; BUY
27 June 2018
Insight Securities (Private) Limited
Pak Elektron Limited (PAEL PA) has shed 26% of its market cap in the past 3 months, compared to 8% decline in KSE100. This underperformance has been a factor of 1Q result missing market expectations along with concerns over competition & pricing pressures post currency devaluation.
Despite inherent risks, we believe this underperformance has opened up a decent entry point as we draw closer to the end of the 2Q, which has also historically stayed best quarter in terms of sales & profits. Since currency devaluation affects imported goods and local manufacturers to the same extent, cost pressures emanating from weaker Rupee are usually passed on to the consumer, without any significant hit to the company’s margins.
We currently have a ‘BUY’ call on PAEL with December 2018 DCF based Target Price of PKR47/share, providing 43% price upside. On top of this, recent price decline has also made the scrip attractive on dividend yield. The scrip is trading at a 2019 P/E of 6.2x, well below its 5 year average of 9x. Key risks to our valuations include, i) lower than expected volumes, ii) lower than expected margins and iii) higher than expected discounts.