PAEL: Getting the short end of the stick
- Citing LSM data for major consumer durable segments indicating continued weakness in offtake and requisite slowdown in production (Refrigerators/A.C sales shift -21/+1% for 11MFY19), leading us to take a conservative stance on CY19 sales outlook.
- Downward revision of our GM outlook and raised finance costs are two major macro spillovers pulling profitability lower, where our revised forecasts indicate CY19/20/21 EPS/LPS of -1.16/0.58/3.24, where the confluence of weak pricing power and uncontrolled below the line expenses make CY19 a tough year.
- Earnings for 2QCY18 (date yet to be announces, likely mid-august) are expected at PkR147mn (EPS:0.30) down 64%QoQ/78%YoY. Tapered sales, without any requisite dip in cost of sales deplete GM to ~21% vs. 23.2% during 2QCY18, while +17/+25% QoQ/YoY hike in finance costs suppress profitability further.
- Resultantly, following a downward revision of earnings estimates we revise down our TP to PkR18.3/sh, offering 21% upside to last close. A tough CY19 is has already begun to be prices in, where the stock has slid 39.8%CYTD; investors are advised to build position on dips.
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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