We initiate coverage on Air Link Communication Limited (AIRLINK) with a “BUY” call and a Jun’25 target price of PKR 186.9/share, implying a 47.9% upside from current levels. Our call is hinged upon i) affordable price range to drive locally assembled phone demand, ii) rising smartphone adoption spurred by population growth and technological advancements, iii) local assembly of Xiaomi TVs reflecting the company’s expanding product portfolio and revenue diversification and iv) significant export potential. We project the company to generate a 4-year forward earnings CAGR of 28%. Currently, the stock is trading at an attractive FY25 / FY26 PE(x) of 7.4x / 6.6x compared to its last 3-yr avg PE(x) of 9.9x.
Made in Pakistan vision
The government’s initiative to promote local mobile phone assembly has been highly successful, with 93% of domestic demand met through local production in 2023. The Device Identification Registration and Blocking System (DIRBS) played a crucial role by imposing duties on imported phones and reducing smuggled devices, making imports expensive and locally assembled phones more affordable. As one of the leading local assemblers, Airlink is well-positioned to capitalize on this trend. Consequently, we project Airlink’s assembly segment revenue to grow at a 3-year forward CAGR of 18% by FY28.
Key drivers behind the surge in smartphone usage in Pakistan
Smartphone demand in Pakistan is expected to grow annually by 10% due to a growing population, technological advancements, and the expansion of 4G and 5G networks. Local assembly and government policies like DIRBS have made smartphones more affordable and accessible. Additionally, the rise of e-commerce, remote work, online education, and social media has further fueled demand, making smartphones essential for connectivity and digital engagement.
Mastering the partnerships game
Airlink’s partnership with Xiaomi through its subsidiary, Select Technologies, has allowed it to manufacture Xiaomi handsets in Pakistan since 2022. This venture has opened up other opportunities, with Airlink now set to begin assembling Xiaomi Smart TVs and potentially introducing Xiaomi electric vehicles to the Pakistani market. Airlink has also recently announced a strategic partnership with Acer Gadget to enter an exclusive assembling agreement.
Exploring potential export opportunities
Pakistan’s local mobile phone manufacturers now meet the entire ~32 million unit annual demand, creating potential export opportunities. However, exports will depend on government incentives and market conditions. Although export sales are not part of our base case, the potential upside is significant. Exporting 400,000 phones could generate an additional PKR 26.7bn in revenue, and a 4% government rebate combined with these sales could boost EPS by PKR 5.2/share, enhancing FY25 EPS by 30%.
Courtesy – AHL Research
