Topline Pakistan Research has released an important report on Pak Elektron (PAEL), highlighting that the power segment is expected to dominate in the second half of 2025. The research team recently met with senior management from Pak Elektron, including CFO Mr. Manzar Hasan and GM Finance Mr. Nadeem Asghar, to discuss the company’s recent financial results and outlook.

PAEL has made strides into new markets, particularly in the United States, securing export orders worth US$44 million and targeting US$50 million by the end of 2025. The company has also received orders from global leaders like Tesla, demonstrating its engineering capabilities and competitiveness in international energy solutions.

As of June 2025, PAEL has fulfilled 20-25% of its export orders, amounting to US$9 million, with total supplies reaching US$16 million by August 2025. The company expects to complete its entire order book of US$40-44 million by December 2025.

In terms of expanding its transformer business capacity, PAEL is awaiting the receipt of its U.S. certification, which will allow it to target government-owned companies in the U.S. Currently, the company can only sell to private customers. This certification is anticipated to further accelerate export growth.

On the tariff front, the complete 19% tariff on imports from Pakistan is absorbed by customers, as tariffs on Pakistan remain lower than those of competing countries such as Bangladesh and India. PAEL also benefits from significantly shorter delivery times compared to U.S. manufacturers, with a delivery timeframe of 9 months versus 2 years. While countries like the UAE and Turkey have lower tariffs (10%), they are not major exporters of transformers to the U.S. The main competitors for U.S. exports are China, India, and South Korea, giving Pakistan a competitive edge.

The PAEL meter business is projected to grow 2-3 times next year, increasing from Rs4.5 billion to Rs9 billion. This growth is driven by the requirement for all Distribution Companies (DISCOs) to replace existing simple single-phase meters with two-phase Automatic Meter Reading (AMR) and three-phase AMR meters. PAEL currently holds a 20% market share in this sector, with decent profit margins.

Additionally, the company is in a distribution agreement with Electrolux, with sales this year expected to total Rs2 billion, while sales from Panasonic are projected to reach Rs1.5 billion. PAEL has taken a cautious approach with these premium brands, as market penetration can take time. The company assembles Electrolux products in-house and has the rights to use the Electrolux brand name.

Overall, PAEL is anticipating sales growth of over 30% for 2025. However, it is important to note that the projected volumes for 2025 will still be around 25% lower than the peak volumes achieved in previous years (i.e., 2021).

In the second quarter of 2025, margins improved quarter-on-quarter from 26% in the first quarter to 27.7% in the second quarter, primarily due to higher volumes.

Out of a total of 2,600 appliance dealers in Pakistan, PAEL has established relationships with 1,513 dealers nationwide. The household appliance market in Pakistan is valued at Rs328.6 billion (approximately US$1.2 billion). PAEL holds a 19% market share in refrigerators, 9% in air conditioners, 4% in washing machines, and 25% in water dispensers. In the power segment, PAEL commands a 90% share of the Rs16 billion power transformer market, 17% in the Rs41 billion distribution transformer market, 25% in the Rs17 billion medium and low voltage switchgear market, and 18% in the Rs20 billion energy meter market.

We maintain a buy stance on PAEL, with the stock currently trading at a 2025 estimated price-to-earnings (PE) ratio of 10.0x and a 2026 forecast PE ratio of 8.5x.