PAEL: Dealing with a tough audience
- Reading annual accounts for PAEL, we prune our estimates based on abundant demand headwinds for both business segments, GMs caving-in to rising cost pressures and higher finance costs as the firm supplants working capital outflows with (now costlier) ST borrowing
- Moreover, dismal sales performance in CY19 crystallizes our soft outlook with macro headwinds, combined with additional constraints on the horizon (power tariff hikes, controlled public sector power outlays), keeping us tilted towards subdued earnings growth over the medium term
- On the cost side, subdued COGs headers and below the line expense elements allude to the firm suppressing expansionary (push based sales) efforts, where the launch of the LED TV segment was relatively muted and failed to garner demand
- Amending our estimates based on observed financial metrics in detailed accounts we map out a terse macro backdrop, reflected in stretched CY19/20 P/E of 10.3/7.1x, , where we find our TP of PkR 23.6/sh implies a Neutral stance
- We flag any pickup in public sector power spending and additional barriers to import of appliances as key developments which would make us re-visit our investment case.
Pak Elektron Limited. Pak Elektron Limited is engaged in manufacturing and sale of electrical capital goods and domestic appliances. The Company operates through two segments: Power Division and Appliances Division. The Power Division is engaged in manufacturing and distribution of transformers, switchgears, energy meters, power transformers, construction of grid stations and electrification works. The Appliances Division is engaged in manufacturing, assembling and distribution of refrigerators, deep freezers, air conditioners, microwave ovens, washing machines and other home appliances. It offers services to power utilities, industries, individual customers, housing and commercial projects. Its engineering, procurement and construction (EPC) contracting division delivers custom designed and built high voltage and extra high voltage grid stations, electrification of housing projects and industrial parks. The Company's subsidiary is PEL Marketing (Private) Limited.
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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