Pak Elektron (PAEL): 2QCY19 EPS Rs0.77, down by 42% YoY (lower than expectations)
- Pak Elektron (PAEL) announced its 2Q2019 results, where earnings of the company clocked in at Rs393mn (EPS 0.77) down by 42% YoY mainly on the back of lower gross margins, high admin expense and higher financial charges.
- Discounts during the outgoing quarter increased by ~3ppts YoY to 29.8% vs 26.5% in SPLY. This led to decline in net sales by 2% YoY.
- Gross margins during the 2Q2019 year remained under pressure owing to significant dollar appreciation of 12% which increased the cost of doing business for the company. Gross margins clocked in at 22.3% (down 1ppts YoY).
- Due to economic headwind, intense competition, weak buying power of consumers and lower aggregate demand, volumes in in appliances segment remained on lower side, we believe.
- During 2Q2019 company has increased its administrative expense by 18% due to inflationary pressure, we believe.
- Financial charges increased significantly by 29% YoY owing to hike in policy rate and debt borrowing.
- 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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