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Pakistan noticed local mobile phone production up 55% YoY in May 2024.

§  As per the latest data released by the Pakistan Telecommunication Authority (PTA), local mobile companies have manufactured/assembled 2.23mn units (up 55% YoY) in May-2024. This takes 5M2024 total locally manufactured/assembled to 13.1mn units up 168% YoY.

§  This improvement is mainly led by import restrictions last year coupled with gradual economic recovery. 

§  Pakistan now fulfils 95% of its mobile phone demand through local manufacturing/assembly, compared to a last 5-Years (2019-2023) average of 67% and 8-Years (2016-2023) average of 47%.

§  As per channel check, all mobile brands except iPhone are now being manufactured/assembled in Pakistan.

§  Over the past 3-Years, Pakistan has undergone a significant shift from imported mobile phones to local manufacturing and assembly. This transformation followed the government’s announcement of a local mobile manufacturing policy in 2020 aimed at encouraging international mobile players to establish assembly plants in Pakistan.

§  The shift towards locally manufactured/assembled mobile phones is also driven by their affordability, offering a price gap of 15-20% compared to imported mobile phones of the same build quality.

§  In 2016, only 1% (0.29mn units) of mobile phones were assembled locally in Pakistan, with 99% (21.36mn units) being imported. However, in 5M2024, Pakistan imported only 5% (0.75mn units) of its mobile phones, while local manufacturing/assembly accounted for 95% (13.08mn units).

§  Within the locally assembled mobile phones of 13.08mn units during 5M2024, 62% (8.1mn units) are smartphones, while the remaining 38% (4.98mn units) are 2G phones.

§  In 2020, Pakistan experienced a peak total demand of 37.56mn units of mobile phones. This highest demand was driven by the COVID-19 pandemic, during which many people stayed at home, leading to a rising trend of remote work, e-commerce, and online education.

§  According to channel checks, based on current monthly run rate and the recent imposition of an 18% sales tax on all mobile phones in Budget FY25, total mobile phones demand may reach 30-35mn units in 2024 vs 22.9mn units sold in 2023.

§  Within the listed sector, Air Link Communication (AIRLINK) stands out as the major beneficiary of the expanding market size and growing share of local mobile phones. AIRLINK is currently trading at an FY24E PE of 8.4x and FY25F PE of 5.4x.

§  Similarly, 7% of Lucky Cement’s (LUCK) consolidated revenue comes from its mobile business, which will also benefit from the rising local demand for mobile phones. The LUCK is trading at an FY24E PE of 4.1x and FY25F PE of 3.6x.

Courtesy- Topline Pakistan Research

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