Waves Singer Pakistan Limited – a progress report

BMA Capital Management hosted a webinar on appliances sector recently where we invited Mr. Haroon khan, Chief Executive Officer (CEO) of Waves Singer Pakistan Limited (WAVES) to discuss the outlook of the sector. Key takeaways from the session are given below:

Mr. Haroon shared that the cumulative decline of 625bps in the interest rates along with the sharp recovery in economic activity has resulted in significant increases in the order book. Moreover, revival of economic activity after lifting of lockdown along with reopening of key businesses such as marriage halls/hotels/restaurants etc. will keep the momentum going.

The company remains a dominant force in the deep freezer market with a market share of 31%. Sales of deep freezers contribute ~40% to company’s total sales followed by refrigerators, AC and other appliances. WAVES’s market share in refrigerator sales is ~7% whereas its share in the water heater and Air Conditioner (AC) sales stands at 20% and 2%.

Management expects existing sales mix to tilt in favor of the refrigerator and AC segment as both segments have significant potential to post growth going forward.

The company is currently operating multiple product lines under two brands Waves and Singer which has been resulting in product overlapping to some extent. Going forward, management is planning to use both the brands to cater to the needs of consumers with different purchasing power.

Localization is at optimal level in entire local industry for refrigerators and deep freezers in Pakistan while majority of raw materials are imported, as these are not available in the country. This is the reason that entire local industry is exposed to currency risks. This remains primary reason behind weakening margins in the recent past.

Currently deep freezer segment is operating at full capacity whereas the refrigerator segment is operating at 70-75% utilization level. Improvement in utilization levels of other segments is expected as the company emerges from COVID-19 related problems.

The company is planning to shift its production facility outside the city as it has been evaluating options to utilize its existing land for a housing project. The main rationale for this move is to achieve better production efficiencies, more space and move the facility away from crowded area.

Various options with regards to the announced Housing Project on existing land are under consideration. (BMA Capital Management Ltd.)

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