We initiate coverage on Airlink Communication (AIRLINK), Pakistan’s largest mobile manufacturing company. With a ‘Buy’ rating and a June 2025 target price of Rs155 per share, it offers a potential total return of 58%.

• Despite a substantial increase in share price over the last 12 months, we believe the company’s growth story is not yet fully priced in. Our liking for AIRLINK stems from the rising demand for locally assembled smartphones and its attractive valuation.
• We expect mobile phone demand in Pakistan to grow at a 3 year (2024-2026) CAGR of 18% from 23mn units in 2023 to 38mn units in 2026, compared to a 5 year (2019-2023) CAGR of 6%.
• The overall increase in cell phone demand is due to the increasing population, shift towards e-commerce, 4G expansion and planned 5G rollout, lower per capita usage, and no import restriction after the IMF program.
• Over the past 3-Years, Pakistan has shifted significantly from imported mobile phones to local manufacturing/assembly. This transformation is due to the government’s announcement of a local mobile manufacturing policy in 2020 to encourage international mobile players to establish assembly plants in Pakistan.
• Among the other reasons for the increase in demand for local smartphones in Pakistan is the imposing higher taxes on imported mobile phones through the Device Identification Registration and Blocking System (DIRBS) in 2019.
• With the implementation of DIRBS, taxes on imported Completely Built Units (CBUs) are, on average, 18% higher compared to Completely Knocked Down (CKD) locally assembled mobile phones.
• We believe AIRLINK is well-positioned to capitalize on the rising demand for mobile phones. AIRLINK’s revenue is expected to grow at a 5-year (FY24-28) revenue CAGR of 44%, increasing from Rs37bn in FY23 to Rs228bn in FY28. Similarly, the company’s profit is expected to grow at a 5-year (FY24-28) CAGR of 59%, from Rs961mn in FY23 to Rs9.7bn in FY28.
• Attractive Valuation: We have used Free Cash Flow to Equity (FCFE) using a Discounted Cash Flow (DCF) valuation methodology. Based on that, we arrive at the Jun-2025 target price of Rs155/share, suggesting a total return of 58% (including a dividend yield of 6%) at a closing price of Rs102/share.
• AIRLINK is trading at an FY25F P/E of 6.4x and an FY26F P/E of 6.0x, compared to its 3-year average P/E (since IPO) of 10.0x, representing discounts of 37% and 40%, respectively.
• Since AIRLINK has no direct competitors listed in the local market, we have compared it with global peers.
• We have selected regional companies, for which data is available on Bloomberg, that manufacture/assemble mobile phones or retail and distribute them. The P/E ratio of its global peers is 18.2x, a significant premium to AIRLINK’s.
• Key risks to our thesis are (1) Import restrictions where AIRLINK is not able to import parts, (2) higher than expected rupee devaluation against the US dollar, (3) higher than expected competition, and (4) technological advancement where AIRLINK is unable to meet customer requirements resulting in lower sales.

Courtesy – Topline Pakistan Research