Karachi, Pak Elektron Limited (PAEL) recently conducted a corporate briefing session, outlining its current market position, financial strategies, and future plans. The session provided insights into the company’s operations amidst economic challenges and its approach to maintaining a competitive edge in the market.
According to AKD Securities Limited, the briefing covered several key points, including the impact of State Bank of Pakistan’s (SBP) LC restrictions on raw material imports, leading to a decline in sales volumes in 2023. Despite this challenge, PAEL managed to offset the impact through aggressive pricing, resulting in elevated gross margins. The management anticipates a growth in sold volumes and increased gross margins (estimated at 27% in CY24) following the easing of import restrictions.
In the appliances division, PAEL faced a significant volume loss due to forex limitations but recovered margins by increasing prices by 40%. The company aims to maintain its market share in this segment, with an expected EBITDA margin of 16% in CY24.
PAEL is focused on reducing its total debt, aiming to bring it down from PkR23.7bn in CY2022 to PkR9.8bn by the end of CY24. The reduction in debt will position the company to start paying out dividends.
Efforts to improve the cash conversion cycle in both power and appliances divisions were highlighted, with specific targets for reducing credit and inventory days. The company also plans to expand its distribution network in the power division, which is expected to increase volumes by 5-7% YoY.
PAEL holds significant market shares in various product segments, including being the market leader in transformers with over 90% share. The collaboration with Panasonic aims to provide premium products in the Pakistani market, with expectations to achieve targets hindered previously by LC restrictions.
The company is exploring corporate restructuring, including a demerger plan, and is seeking suitable investors for this purpose. In terms of sales, the power division is expected to realize sales worth PkR35bn in CY24, with orders already in hand amounting to PKR14-16bn.
PAEL’s reliance on imported raw materials like copper poses exchange rate risks, which the company mitigates through pricing strategies. Raw materials like steel are sourced primarily from International Steels Limited (ISL), with imports as a secondary option.
The company does not have major expansion plans for the power transformer segment but is exploring export opportunities to the US, Africa, and the Middle East, leveraging the quality and pricing of its products.
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