Intermarket Perspective - Pak Elektron Limited - Initiating Coverage
- We initiate coverage on Pak Elektron Ltd (PAEL) with a Buy rating and Dec’17 TP of PkR120/sh (25% upside). PAEL offers a unique combination of exposure to rising consumer demand, and infrastructure growth in the power sector. We forecast 3yr earnings CAGR of 15% (CY16-19F). Our TP implies a target P/E of 11.2x on CY17F EPS.
- PAEL’s appliances division – with second largest market share is well positioned to capitalize on rapidly growing refrigerator sales in Pakistan, bolstered by close competitors being in transition and a protective backdrop. Importantly, with greater appliance sales, PAEL will sustain strong margins and improve cash-flows.
- Also, PAEL’s dominant position in the electrical equipment market will make it a significant contributor to rapid infrastructure development in the power sector amidst an unprecedented investment boom. Burgeoning participation from ADB and WB in this investment cycle will further improve risk profile of sales to power sector.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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