Pak Elektron (PAEL): 1Q2019 EPS of Rs0.8, -22% YoY (+10.6x QoQ) (Above expectations)
- Pak Elektron (PAEL) announced its 1Q2019 earnings where the company’s result came better than our estimates mainly on the back of higher than expected gross margins.
- However, net sales were broadly-in line with our expectations which clocked-in at Rs6.6bn, +5% YoY during the outgoing quarter. Major contribution in revenues was from appliances with over 75% share, we estimate.
- Increase in competition and decline in purchasing power of consumers have affected the company’s appliances division sales. As per our estimates, refrigerator, air conditioner and microwave oven sales have fallen by 10% each YoY to around 85-90k, 18-20k and 8-10k, respectively.
- We believe that the power division of the company may have performed better YoY as the new Govt. resumed previously dormant power projects.
- Gross margins of PAEL clocked-in at 27% in 1Q2019, down 2.3ppts YoY though fared better than our expectations. Contraction in margins came on the back of significant PKR devaluation against the greenback and inflationary pressure.
- We flag, 1) increase in raw material costs and the company’s inability to pass it on, 2) greater than expected PKR devaluation against US$, 3) higher financial charges to fund working capital and 4) greater competition due to new entrants as key risks for PAEL.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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