Topline Securities organised the Pakistan Mid Cap Conference 2024. Day 3 of the conference started with a session on Air Link Communication (AIRLINK), with Mr Amir Mahmood, Group CFO of AIRLINK, and Mr Nusrat Mehmood, CFO of AIRLINK, as the key speakers.
Outlook on revenues: Management expects FY24 revenue to be Rs120bn. For FY25, the management targets revenue of Rs160bn. Out of this, Rs140-145bn will be from the mobile segment, and Rs15-20bn will be from the TV segment. In the Mobile segment, 70% of the revenue is expected to come from the Assembly division and the remaining 30% from the Distribution division in FY25.
For FY26, management expects revenue growth to be 20-25%. If exports are allowed, the will be an upside to the revenues.
AIRLINK’s gross margins are 8-9% for the Assembly division and 5.5-6.0% for the Distribution division.
AIRLINK is the sole manufacturer of Xiaomi mobile phones in Pakistan and the authorised manufacturer of Tecno Mobile in the country, with a 30-40% market share. Xiaomi is the third-largest mobile manufacturer in the world, and Tecno is the fourth-largest. AIRLINK is also in talks with other players to manufacture mobile phones in Pakistan.
The machine for the Xiaomi TV plant has been installed, and testing will be completed in June 2024. The Xiaomi TVs will be launched in the market from July 2024. The total annual capacity of Xiaomi TVs is 200-300K units. Within this, AIRLINK targets to sell 125K units with revenue ranging from Rs15-20bn in FY25.
Outlook on Dividend: Management also highlighted that this year, they will recommend a handsome dividend to the board, but the decision on the dividend announcement is at the board’s discretion. The monthly market size of mobile phones in Pakistan is 1.8mn units, with Airlink manufacturing around 350-400K units. The largest player in the domestic market is Infinix, with monthly sales of 500-550k units.
AIRLINK has a monthly capacity of 1 million units on a double-shift basis and is currently operating at a capacity utilisation of around 40%. The company faces no issues with LC opening at the moment. However, management believes the key risks to the business are macroeconomic.
Xiaomi’s product portfolio includes more than 150 categories, including watches, scooters, and EV cars, and AIRLINK may consider bringing these products to Pakistan. Management commented that in a year, they are now launching Xiaomi’s second product, a TV.
On the localization of mobile phones, management highlighted that they can achieve a maximum of 20% localization, as LCDs and chips constitute a major portion of the mobile phone cost that cannot be localised.
On the export side, the management is working with the government, which has demanded an 8-10% tax rebate, in line with the rebate being offered in China.
Management highlighted that no major CAPEX is planned for the next few years.
Courtesy – Topline Research
