·        To recall, company posted net turnover of PkR69.4bn in 1HCY25 vs PkR58.2bn in 1HCY24, an increase of 19%YoY. Notably, export turnover surged 4.5x YoY to PkR10.2bn from PkR2.3bn SPLY.

·        Domestic cigarette volumes declined by 9%YoY, mainly due to persistent price differential with illicit and untaxed brands.

·        Earnings during 1HCY25 increased by 30%YoY to PkR14.3bn (EPS: PkR55.8) from PkR11.0bn (EPS: PkR43.0) in SPLY. On a quarterly basis, earnings during 2QCY25 increased by 36%YoY PkR8.0bn (EPS: PkR31.3).

·        Gross margin expanded to 47.3% in 1HCY25 from 40.6% in SPLY, driven by operational efficiencies and resource optimization.

·        Management expects gross margin to remain broadly stable in 2HCY25.

·        Management briefed that the total cigarette market size in Pakistan is ~80bn sticks, of which PAKT holds ~35% market share. The company’s production and sales in 1HCY25 stood at ~13bn sticks.

·        Management guided that ‘Velo’ currently contributes 4-5% of revenue, and the segment is expected to break even during the current year. The company operates the second-largest Velo factory worldwide, serving as a regional hub. Presently, the company exports to Japan, the GCC, and Europe.

·        As per management, the illicit market continues to adversely impact the legitimate industry following the FED hike in CY23, with the Illicit share increasing by 4ppts during 1HCY25 to 58%.

·        On floods, management commented that tobacco crops in KPK regions were already harvested and stored before the rains. In Punjab, a significant portion has been harvested, though evaluations are ongoing.

·        Management guided that the increase in the effective tax rate was due to the disallowance of certain expenses by the authorities.

https://research.akdsl.com/638924998033284972.pdf

Courtesy – AKD Research