The Pak Elektron Limited (PAEL) plans to bring new capacities under Refrigerators, Deep Freezers and Air Conditioners categories by 2025. Manzar Hassan, CFO of Pak Elecktron, has recently shared the Company’s strategy and plans at Pakistan Mid Cap Conference 2022, organized by leading Topline Securities.
It mainly operates in two key segments, including Power and Appliances, which contributes around 42% and 58% to the total revenue, respectively.
Pakistan Electronics’ market currently stands at Rs245bn, expected to reach Rs670bn by 2026. The electronics market is subdivided into two main categories; (i) Appliances (Rs220bn/US$1.3bn) and (ii) Screens (Rs25bn). Under Appliances, Refrigerators and Air Conditioners have a share of 38% each.
The Company believes that the Appliances segment is anticipated to witness strong growth amid improving economic growth, rising GDP/Capita, and increasing urbanization.
The management believes that market penetration is still on the lower side under Appliance’s segment as the penetration of Air conditioner, Water Dispenser and LED TV currently stands at 15%, 5% and 9%, respectively. Although the penetration in refrigerators and Washing machines is on the higher side still, technological advancements require in these segments.
Around 71% of the overall market uses CRT TVs which could be gradually replaced, and the Company is targeting this market. In LED Market, the Company believe that the penetration is 9%. In the next 5-years, the penetration is expected to increase to 16%.
The management believes that PAEL’s market shares across all appliances will improve and target to be in the top 3 brands within each category by 2025.
There are around 2,600 appliances dealers in Pakistan, out of which PAEL has a market share of about 58%. This nationwide network of dealers enables the Company to reach a wide universe of customers and provide quality after-sales service.
The Company has also planned to bring new capacities under Refrigerators, Deep Freezers and Air Conditioners categories by 2025.
Under the Power division, the Company enjoys a 90% market share in power transformers, whereas in other segments (Distribution Transformers, Switch Gears and
Energy Meters) the Company is yet to achieve its target market share. Currently, the market shares on these segments are 18-25%.
The Company expects that rising urbanization and Govt. investment in power transmission will be positive drivers for the segment growth.
The Company expects 35-40% growth in the Power division, whereas PAEL expects 25-30% growth in Appliances. This growth includes both volumetric and inflationary impacts.
The Company’s Gross Margin expected to remain the same, which we have witnessed in the last three years.