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AIRLINK - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 21, 2023)

AIRLINK held its analyst briefing session today to discuss their FY23 results. Brief points from the session are mentioned below:

Xiaomi smart televisions (TVs) are positioned in between Samsung and TCL in terms of marketing, wherein the quality will be at par with Samsung, and the price point in line with TCL. The management expects to compete with Samsung in the local market.
The TV project aims to earn gross margins and net margins of ~18% and 6%, respectively, as per the management. Total mix in revenues will be known once the project comes online. Production is expected to initiate by March’24, after a trial run in February’24.
Management apprised about their high tech manufacturing facility, utilizing robotics for their processes. With regards to their partnership with Xiaomi, the management believes to collaborate further in the future in terms of technology transfer, however the timelines for future course of action are undefined at the moment.
Company spelled out their localization strategy; the first step was to assemble (in progress currently), after which the company aims to initiate manufacturing using local parts, and the final stage is technology development.
Initially the company had 36 Xiaomi engineers, which have been reduced to 13 presently, with focus on increasing local engineers (trained in China) in the workforce.
Responding to a question regarding smart TVs CAPEX, the management stated that the exact amount cannot be disclosed, however the amount is on the lower side, not expected to burden the company’s cashflows. This is owing to having all requisite facilities available within their plant.
Marketing of the brand remains with Xiaomi including all associated costs. Further the company in talks with the government for export related benefits.
With regards to import restrictions continuing in the future, the company has prepared a strategy with Xiaomi to incorporate exports in the sales model immediately, earning forex to compensate for any forex outflows through imports. Furthermore, there are no import restrictions presently, as per the management.
Current market share in smartphones of the company is at 20%-23%.
With regards to stability in margins, the company stated the inherent safety in the model wherein they produce, sell to Xiaomi, which is resold to Airlink communication (retail). Hence the company makes healthy margins from toll manufacturing and 18%-19% from retail.
Management expects high future revenue growth owing to being a technology company, further to be boosted by exports. Company expects to maintain its growth rate, due to improving macro-economic factors.
With the coming of 5G, the management believes demand for smartphones will skyrocket within the next few years.
Revenue mix consists of 57% from assembly, and remaining from distribution.
The management believes that with positive operating cashflows, available lines of credit and cushion to make finance costs, the company can grow to PkR100bn topline easily in FY24, further supported by effective working capital management.
The management believes that with the right government incentives, the sector can achieve ~US$15bn annually in exports.
The company’s intent in acquiring Shell Pakistan came from disruptions in the current business, where the management believed that diversification into an essential commodity producer will cushion the bottomline in case the core business continues hurting.